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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LffiRARY 


Digitized  by  tine  Internet  Arcinive 

in  2007  witin  funding  from 

IVIicrosoft  Corporation 


littp://www.arcliive.org/details/federalincometaxOOwliitiala 


THE 

FEDERAL   INCOME 
TAX  LAW 


ANNOTATED   WITH    COMPLETE   CONSTITU- 
TIONAL AND  HISTORICAL  REFERENCES 
AND   DIGEST   OF   AUTHORITIES 


BY 
HENRY  CROFUT  WHITE,  A.  M.,  LL.B. 

OF    THE    NEW    YORK    BAR 


THE  BANKS  LAW  PUBLISHING  CO. 

NEW  YORK 

1913 


COPYRIQHT,  1913,    BT 

THE  BANKS  LAW  PUBLISHING  COMPANY 


T 


TABLE  OF  CONTENTS 


CHAPTER  I 

PAGE 

Historical 1 

Acts  in  foreign  countries  other  than  England  and  Colonies . .  2 

American  colonial  and  state  acts 4 

British  colonial  acts 2 

Earliest  income  tax  acts 1 

English  acts 1 

Federal  acts 6 

Southern  Confederacy,  1861 6 

CHAPTER  II 

Constitutionality 9 

Constitutional  power  to  tax — limitations 9 

Direct  tax — constitutional  amendment 15 

Double  taxation 12 

Due  process,  etc 13 

Ex  post  facto  statutes 15 

Impairment  of  contracts. 10 

Income  tax,  a  direct  tax 14 

Payment  of  tax  at  the  source 10 

Questions  as  to  present  act 18 

Retroactive  and  alien  taxation 15 

Taxation  of  aliens 20 

Uniformity  of  exemption 11 

Uniformity  of  taxation 11 

CHAPTER  III 

Construction 24 

Construction  of  act  of  1913 31 

Construction  of  particular  acts 30 

External  evidence  of  legislative  intent 26 

General  rules 24 

Internal  evidence  of  legislative  intent 26 

Rules  specifically  applicable  to  tax  acts 27 

iii 


756015 


IV  TABLE   OF   CONTENTS 


CHAPTER  IV 

PAGE 

The  act  of  October,  1913,  annotated 32 

CHAPTER  V 

Revised  statutes  relating  to  the  administration  of  the  internal 

revenue  law 120 


APPENDIX 

Federal  income  tax  acts 169 

Tables  of  dates,  limitations  and  penalties 302 

Index 307 


TABLE  OF  CASES 

Ref ereaces  are  to  pages 
A 

PAGE 

Adams  v.  United  States,  1  Ct.  CI.  306 163 

Adams  v.  Woods,  2  Cranch,  336,  2  L.  Ed.  297 25 

Aiken  v.  Trustees,  1896,  W.  N.  (Eng.),  Part  1-120 58 

Alkan  v.  Bean,  8  Biss.  83,  Fed.  Cas.  202,  23  I.  R.  R.  351 135 

Allegany  v.  Federal,  etc.,  179  Pa.  St.  424,  36  A.  320 .39 

American  Brush  &  Broom  Co.  v.  Addickes,  19  Misc.  36,  42  N.  Y. 

Supp.  871 85 

American  Contractor  Pub.  Co.  v.  Bagge,  91  N.  Y.  Supp.  73 83 

American  Loan  &  Trust  Co.  v.  Eastern  &  Western  R.  R.  Co.,  37 

Fed.  242 84 

American  Net  &  Twine  Co.  v.  Worthington,  141  U.  S,  468,  35  L. 

Ed.  821,  12  S.  Ct.  55 28 

Ames  V.  Hager,  13  Sawy.  473,  1  L.  R.  A.  377,  36  Fed.  129 161 

Amy  V.  Smith,  1  Litt.  (Ky.)  326 41 

Andrews  v.  Mayor,  L.  J.  R.  N.  S.  61  Q.  B.  D.  715 91 

Anglo,  etc.  Works  v.  Bell,  38  Solic.  J.  325 100 

Archer,  Re,  9  Ben.  427,  Fed.  Cas.  506,  24  I.  R.  R.  110. .  124, 125, 131 

Arizona  Copper  Co.  v.  Surveyor,  1896  N.  W.  (Eng.)  Part  1, 93 61 

Armour  v.  Roberts,  151  Fed.  844 , 157, 164 

Arnold  v.  Davis,  8  R.  I.  341 44 

Arnson  v.  Murphy,  109  U.  S.  238,  27  L.  Ed.  920,  3  S.  Ct.  184 

159,  164,  166 

Attorney  General  v.  Black,  L.  R.  6  Ex.  78,  aff'd  308 93 

Attorney  General  v.  Coote,  4  Price,  183 44,  45 

Atwood  V.  Weems,  99  U.  S.  183,  25  L.  Ed.  471 134,  137,  138 

Averill  v.  Smith,  17  Wall.  82,  21  L.  Ed.  613 162 

B 

Bailey  v.  Bull,  5  Barb.  158 45 

Bailey  v.  Railroad  Co.,  106  U.  S.  109,  27  L.  Ed.  81 35,  39,  151 

Bailey  v.  Railroad  Co.,  22  Wall.  604,  22  L.  Ed.  840 35,  78,  159 

Bank  of  Memphis  v.  Tennessee,  161  U.  S.  134,  40  L.  Ed.  645 28 

Barnes  v.  The  Railroads,  17  Wall.  294,  21  L.  Ed.  544. 21 

V 


VI  TABLE   OF   CASES 

\References  are  to  pages 

PAGE 

Barnett  v.  United  States,  16  Ct.  CI.  515 156 

Barron  v.  Burke,  82  111.  App.  116 44 

Bartlett  v.  The  Mayor,  etc.,  7  N.  Y.  Super.  Ct.  44 44,  45 

Beard  v.  Union  and  American  Pub.  Co.,  71  Ala.  60 86 

Becker,  Re,  1  Cin.  Law  Bull.  165,  Fed.  Cas.  1208,  22  I.  R.  R.  266, 

3  Cent.  L.  J.  495,  3  N.  Y.  Week.  Dig.  60 14 

Bell  City  Mfg.  Co.  v.  Frizzell,  11  Idaho,  1,  81  P.  58 85 

Bell's  Gap  R.  R.  Co.  v.  Pennsylvania,  134  U.  S.  232, 33  L.  Ed.  892 .      11 

Bennett  v.  Hunter,  9  Wall.  326,  19  L.  Ed.  672 134,  138 

Bemier  v.  Bernier,  147  U.  S.  242, 37  L.  Ed.  152, 13  S.  Ct.  244 25 

Bertha  Zinc  &  Mineral  Co.  v.  Clute,  7  Misc.  123,  57  St.  Rep.  70,  27 

N.  Y.  Supp.  342 84 

Blacklock  v.  United  States,  208  U.  S.  75,  52  L.  Ed.  396 136,  146 

Blake  v.  National  City  Bank,  23  Wall.  307,  23  L.  Ed.  119 26,  31 

Boardman  &  Conklin  v.  House,  18  Wend.  512 44 

Boardman  v.  S.  S.  McClure  Co.,  123  Fed.  614 82 

Boehm  v.  United  States,  21  Ct.  CI.  290 159,  160 

Boyd  V.  United  States,  116  U.  S.  616,  29  L.  Ed.  746,  6  S.  Ct.  524 

14,  123 

Braun  v.  Sauerwein,  10  Wall.  218,  19  L.  Ed.  895 164 

Brewer  v.  Blougher,  14  Pet.  178,  10  L.  Ed.  408 24 

Brisco  V.  Bank  of  the  Commonwealth,  11  Pet.  257-323,  9  L.  Ed. 

709-735 93 

Brisenden  v.  Chamberlain,  53  Fed.  307-8 44 

Broughton  and  Plas  Power  Coal  Co.  v.  Kirkpatrick,  L.  R.,  14  Q.  B. 

D.  491 01,  63 

Brown,  Re,  Fed.  Cas.  1977,  3  I.  R.  R.  134 26,  29,  125 

Brown  v.  Ashbough,  40  How.  Pr.  226 44 

Brown  v.  Burt,  81  L.  J.  K.  B.  17 45 

Brown  v.  Goodwin,  75  N.  Y.  409 135,  140,  1 13 

Brown,  Administratrix,  v.  United  States,  113  U.  S.  568,  28  L. 

Ed.  1079,  5  S.  Ct.  648,  20  Ct.  CI.  534 27 

Brown  Seed  Co.  v.  Richardson,  53  Misc.  517, 103  N.  Y.  Supp.  243 . .     84 

Bruner  v.  Kansas  Moline  Plow  Co.,  168  Fed.  218 83 

Burgess  v.  Salmon,  97  U.  S.  381,  24  L.  Ed.  1104 18 

Burnley  Co.  v.  Aiken  (1896)  W.  N.  (Eng.)  Part  I,  115 61 

Burrows  v.  Miller,  4  How.  Pr.  349 44 

Burrows  Co.  v.  Caplin,  127  App.  Div.  317,  111  N.  Y.  Supp.  498..     85 

Burton  v.  Burton,  40  N.  Y.  (1  Keys)  359 41 

Butterworth  v.  United  States,  112  U.  S.  50,  28  L.  Ed.  656,  5  S.  Ct. 

25... 162 


TABLE    OF   CASES  vil 

References  are  to  pages 

G  PAGE 

Cabot  V.  City  of  Boston,  66  Mass.  52 44,  45 

Caesar  v.  Capell,  83  Fed.  403 80 

Caha  V.  United  States,  152  U.  S.  211,  38  L.  Ed.  415,  14  S.  Ct.  513    30 

Calder  v.  Bull,  3  DaU.  386-389,  1  L.  Ed.  648-650 16 

Campbell  v.  Gordon,  6  Cranch,  176,  3  L.  Ed.  190 41 

Campbell  v.  United  States,  107  U.  S.  407, 27  L.  Ed.  592, 2  S,  Ct.  579, 

18  Ct.  CI.  762 30 

Cardinel  v.  Smith,  Deady,  197,  Fed.  Cas.  2395 25 

Carlisle  v.  United  States,  16  Wall,  147, 21  L.  Ed.  426,  8  Ct.  CI.  153 

26,29 
Carpenter  v.  Pennsylvania,  17  How.  (U.  S.)  456, 15  L.  Ed.  127. ...     16 

Cary  v.  Curtis,  3  How.  (U.  S.)  236,  11  L.  Ed.  576 164 

Cary  v.  The  Savings  Union,  22  WaU.  38,  22  L.  Ed.  779 36 

Central  National  Bank  v.  United  States,  137  U.  S.  355,  34  L.  Ed. 

703,  11  S.  Ct.  126 35,  79,  103,  151 

Chadwick,  Re,  1  Low.  439,  Fed.  Cas.  2570,  11  I.  R.  R.  126.  .  .123,  125 

Chaine  v.  Wilson,  16  How.  Pr.  552,  8  Abb.  Pr.  78, 1  Bosw.  673 44 

Chandos  v.  Inland  Revenue  Commissioners,  20  L.  J.  Ex.  269. ...    28 

Cheatham  v.  United  States,  92  U.  S.  85,  23  L.  Ed.  561 162 

Chesebrough  v.  United  States,  192  U.  S.  253,  48  L.  Ed.  432,  24  S. 

Ct.  262 165 

Chesna  Sulphur  Co.  v.  Nicholson,  1  Ex.  D.  437,  35  L.  T.  R.  275. ...     45 

Chicago  B.  &  Q.  R.  R.  Co.  v.  Page,  1  Biss.  461,  Fed.  Cas.  2668 39 

Chicago,  M.  &  St.  P.  R.  Co.  v.  United  States,  127  U.  S.  406,  32  L. 

Ed.  180,  8  S.  Ct.  1194 25 

Christian  v.  American  Freehold,  L.  &  M.  Co.,  89  Ala.  198,  7 

So.  427 84 

Christie  Street  Com.  Co.  v.  United  States,  136  Fed.  326, 69  C.  C.  A. 

464 161,  166 

Church  V.  Rowell,  49  Me.  367 45,  160 

Cincinnati  Brewing  Co.  v.  Bettman,  102  Fed.  16 161 

City  V.  Board  of  Assessors,  52  La.  Ann.  223,  26  So.  872 88 

City  of  Allegheny  v.  Federal  Street  &  Pleasant  Valley  R.  R.  Co., 

179  Pa.  St.  424,  36  A.  320 39 

City  of  London  Cont.  Corp.  v.  Stiles,  4  Times  L.  R.  51 62,  63 

City  of  New  Orleans  v.  Davidson,  30  La.  Ann.  554 12 

City  of  Philadelphia  v.  Collector,  5  Wall.  720,  18  L.  Ed.  614.  .161,  164 
City  of  Philadelphia  v.  Pennsylvania  Hospital,  134  Pa.  St.  171,  19 

A.  490 90 

Clarke.  Likens,  26  N.  J.  Law207 44 

Clay  V.  Swope,  38  Fed.  396 133 


Vm  TABLE  OF  CASES 

References  are  to  pages 

PAGE 

Clinkenbeard  v.  United  States,  21  WaU.  65, 22  L.  Ed.  477 150 

Cliquot's  Champagne  v.  United  States,  3  Wall.  1 14, 18  L.  Ed.  1 16 . .     28 

Coblens  v.  Abel,  1  Woolw.  293,  Fed.  Cas.  2926 159,  162 

Cohens  v.  Virginia,  6  Wheat.  264,  5  L.  Ed.  257 161 

Collector  v.  Day,  11  Wall.  113,  20  L.  Ed.  122 10,  12,  53 

CoUector  v.  Hubbard,  12  WaU.  1-8,  20  L.  Ed.  272 35,  161,  164 

Collins  V.  New  York  Post-Graduate  Medical  School,  59  App.  Div. 

63;  69  N.  Y.  Supp.  106 88,  89 

Colorado  Iron  Works  v.  Sierra  Grande  M.  Co.,  15  Col.  499,  25  P. 

325 86 

Coltness  Iron  Co.  v.  Black,  L.  R.  6  A.  C.  315 61 

Colton  Press  Co.  v.  Collector,  1  Woods,  296,  Fed.  Cas.  3271 ....  155, 160 

Comitis  V.  Parkerson,  56  Fed.  556, 22  L.  R.  A.  148 42 

Commercial  Wood  &  Cement  Co.  v.  Northampton  etc.  Co.,  41 

Misc.  242, 84  N.Y.  Supp.  38 83 

Commissioners  v.  Antill,  1902,  A.  C.  422 62,  63 

Commissioners    of    Sinking    Fund    v.    Buckner,    48    Fed.    533 

38,  161,  162,  164 

Commissioners  v.  Lovell  &  Christmas  Co.,  1908,  A.  C.  46 81 

Commissioners  v.  Pemsel,  L.  R.  1891,  A.  C.  531 88, 163 

Commonwealth  v.  American  Bell  Telephone  Co.,  129  Pa.  St.  217, 

18  A.  122 83 

Commonwealth  v.  Central  Transportation  Co.,  145  Pa.  St.  89,  22 

A.  209 38 

Commonwealth  v.  Delaware  D.  C.  Co.,  123  Pa.  St.  602, 16  A.  584, 

2  L.  R.  A.  798 12 

Commonwealth  v.  Erie  &  Pittsburg  R.  R.  Co.,  74  Pa.  St.  98..  .37,  151 
Commonwealth  v.  Germania  Brewing  Co.,  145  Pa.  St.  83,  22  A. 

240 11 

Commonwealth  v.  Gloucester  Ferry  Co.,  98  Pa.  St.  105,  rev'd  114 

U.  S.  196,  29  L.  Ed.  158 81 

Commonwealth  v.  Long,  1  Pa.  Co.  Ct.  Rep.  190 82 

Commonwealth  v.  Ocean  Oil  Co.,  59  Pa.  St.  61 34 

Commonwealth  v.  Pittsburgh  Ft.  W.  &  C.  Ry.  Co.,  74  Pa. 

St.  83 37 

Commonwealth  v.  Sharon  Coal  Co.,  164  Pa.  St.  284, 30  A.  127 11 

Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  St.  119 85 

Commonwealth  v.  United  States,  37  Ct.  CI.  536 159 

Conant  v.  Kinney,  162  Fed.  580 162,  165 

Concord  Ry.  Corp.  v.  Topliff,  Fed.  Cas.  3093 31 

Cone  V.  Tuscaloosa  Mfg.  Co.,  76  Fed.  891 82 

Cooper  V.  Cadwallader,  42  Sc.  L.  R.  117,  5  Tax  Cas.  101 45 


TABLE   OF   CASES  IX 
References  are  to  pages 

PACK 

Cooper  Mfg.  Co.  v.  Ferguson,  113  U.  S.  727,  28  L.  Ed.  1137,  5  S. 

Ct.  739 85 

Cork  V.  Fry,  (1896)  W.  N.  (Eng.),  Part  1, 128-131 37 

Corning  &  Co.  v.  United  States,  34  Ct.  CI.  271-278 156 

Cox  V.  Allen,  91  la.  462,  59  N.  W.  335 44 

Craft  V.  Schafer,  153  Fed.  175 127 

Crawford  v.  Eidman,  139  Fed.  992 163 

Crawford  v.  Wilson,  4  Barb.  504 44 

Crocker  v.  Muller,  40  Misc.  685,  83  N.  Y.  Supp.  189 83 

Cummer  Liunber  Co.  v.  Associated  Mfg.  Mut.  Fire  Ins.  Corp.,  67 

App.  Div.  151,  73  N.  Y.  Supp.  668;  aff'd  173  N.  Y.  633;  6  N. 

E.  1106 83,  84 

Cummings  v.  Merchants'  National  Bank,  101  U.  S.  153,  25  L.  Ed. 

903 10 

Cunningham  v.  Mound,  2  Ga.  171 44 

Curtis  V.  Leavitt,  17  Barb.  309 16 

D 

Bandelet  v.  Smith,  18  Wall.  642,  21  L.  Ed.  758 131 

Davidson  v.  New  Orleans,  96  U.  S.  97,  21  L.  Ed.  616 13 

Davies  v.  Arthur,  96  U.  S.  148,  24  L.  Ed.  758 163 

Davis  V.  Hall,  1  Nott.  &  M.  292 41 

Dawson,  Ex  parte,  3  Bradf .  130 41 

Day  V.  Buffington,  3  Cliff.  376,  Fed.  Cas.  3675,  111.  R.  R.  205,  5 

Am.  L.  Rev.  176, 2  Leg.  Gaz.  249 32 

DeBary  v.  Carter,  102  Fed.  130,  42  C.  C.  A.  209 160 

DeBary  v.  Dunne,  162  Fed.  961 159,  160 

DeBary  v.  Souer,  101  Fed.  425,  41  C.  C.  A.  417. 28 

DeBeers  Consolidated  Mines  Ltd.  v.  Howe,  L.  R.  (1906)  A.  C.  455.  81 

Decatur  v.  Paulding,  14  Pet.  497,  10  L.  Ed.  559 163 

Delaware  R.  R.  Co.,  v.  Prettyman,  17  I.  R.  R.  99,  Fed.  Cas.  3767.  157 
DeLima  v.  BidweU,  182  U.  S.  1-178,  45  L.  Ed.  1041-1049,  21  S.  Ct. 

743 164 

Denn  v.  Diamond,  10  E.  C.  L.  320 25 

Diamond  Glue  Co.  v.  United  States  Glue  Co.,  187  U.  S.  611,  47  L. 

Ed.  328, 23  S.  Ct.  206 81 

Didier  v.  Patterson,  93  Va.  534,  25  S.  E.  661 45 

Dillon  V.  Corporation  of  Haverfordwest,  L.  J.  R  (1891)  N.  S.,  60 

Q.  B.  477,  L.  R.  (1891),  1 Q.  B.  D.  575 93 

Dinsmore  v.  Southern  Express  Co.,  92  Fed.  714,  rev'd  102  Fed.  794, 

42  C.  C.  A.  623 161 

Doe  V.  Snaith,  21  E.  C.  L.  253 25 

Doll,  Re,  11  I.  R.  R.  36,  7  Phila.  595,  Fed.  Cas.  3968 14 

\ 


X  TABLE    OF    CASES 

References  are  to  pages 

PAQti 

Doll  V.  Evans,  9  Phila.  364,  Fed.  Cas.  3969, 4  Leg.  Gaz.  113, 1^  I.  R. 

R.  143,  29  Leg.  Int.  116,  11  Am.  L.  Reg.  (N.  S.)  315 13 

Dollar  Sav.  B'k  v.  United  States,  19  Wall.  227,  22  L.  Ed.  80. .  30,  90,  150 
Dorscheimer  v.  United  States,  7  Wall.  166-173, 19  L.  Ed.  187. .. .  157 
Downes  v.  Bidwell,  182  U.  S.  248, 45  L.  Ed.  1088,  21  S.  Ct.  770. .. .  161 

Dugan  V.  United  States,  34  Ct.  CI.  458 159 

Dunlap  V.  United  States,  173  U.  S.  65, 43  L.  Ed.  619, 19  S.  Ct.  319. .    26 

Dunnegan  v.  United  States,  17  Ct.  CI.  247 156,  162,  164 

Dupasseur  v.  United  States,  19  Ct.  CI.  1 155 

Duronsseau  v.  United  States,  6  Cranch,  307,  3  L.  Ed.  232 25 

E 

Edye  v.  Robertson,  Collector,  112  U.  S.  580,  28  L.  Ed.  798, 5  S.  Ct. 

247 11 

Eidman  v.  Martinez,  184  U.  S.  578,  46  L.  Ed.  697,  22  S.  Ct.  515 

23,  25,  29 

Eley's  Appeal,  2  Kulp  (Pa.)  467, 103  Pa.  300 37 

Eliot  V.  Freeman,  220  U.  S.  178, 55  L.  Ed.  424 89 

Eliott  V.  Swartwout,  10  Pet.  137, 9  L.  Ed.  373 165 

ElktJ.WUWns,  112U.S.94,28L.Ed.643,5S.Ct.41 42 

Elliott  V.  Parlin  &  0.  Co.,  71  Kan.  665, 81  P.  500 43 

Emery,  Bird  Thayer  Realty  Co.  v.  United  States,  198  Fed.  242 

80,  111,  164 

Enston,  Re,  113  N.  Y.  174, 3  L.  R.  A.  464, 21 N.  E.  87 28 

Equitable  Trust  Company  v.  Seldon,  Fed.  Cas.  4508,  afif'd,  94  U.  S. 

419,  24  L.  Ed.  249 24,  28 

Erhardt  r.  Schroeder,  155  U.  S.  124,  39  L.  Ed.  94 29 

Erichson  v.  Last,  L.  R.,  8  Q.  B.  D.  414 81 

Erie  Railway  Co.  v.  Pennsylvania,  21  Wall.  492,  22  L.  Ed.  595 ... .     28 

Erskine  v.  Hohnbach,  14  WaU.  613,  20  L.  Ed.  745 132,  159,  164 

Exchange  Bank  Tax  Cases,  21  Fed.  99,  aff'd,  122  U.  S.  154,  30  L. 

Ed.  1088,  7  S.  Ct.  1244 17 

F 

Fairbanks  v.  United  States,  181  U.  S.  283,  45  L.  Ed.  862 27 

Farmer  v.  Scottish  North  American  Trust  Co.,  L.  R.  (1912)' A.  C. 

118 59 

Farrior  v.  New  England  Mortgage  Security  Co.,  88  Ala.  275,  7  So. 

200 86 

FideUty  Ins.  T.  &  S.  D.  Co.  v.  McClam,  178  U.  S.  113,  44  L.  Ed. 

998 12 

First  National  Bank  v.  Kentucky,  9  Wall.  353,  19  L,  Ed.  701.  . .      10 


TABLE   OF   CASES  XI 
References  are  to  pages 

PAGE 

First  National  Bank  of  Greencastle  v.  United  States,  15  Ct.  CI. 

225 156,  164 

Flemister  v.  Flemister,  83  Ga.  79, 9  S.  E.  724 143 

Fletcher  v.  Peck,  6  Cranch,  87-137, 3  L.  Ed.  162-178 16 

Flint  V.  Stone-Tracey  Co.,  220  U.  S.  107,  55  L.  Ed.  389 12,  13,  14 

Florer  v.  Sheridan,  127  Ind.  28, 36  N.  E.  365, 23 1..  R.  A.  278 51 

Florsheim  Bros.  D.  G.  Co.  v.  Lester,  60  Ark.  120,  29  S.  W.  34,  27  L. 

R.  A.  505 86 

Foley  ».  Fletcher,  3  H.  &  N.  769 38 

Folsom  V.  United  States,  21  Fed.  37 17 

Forbes  v.  Scottish  Institute  (1896)  W.  N.  (Eng.),  Part  1-122 38 

Forder  v.  Handyside,  L.  R.  1  Ex.  D.  233 56 

Fox  V.  Stafford,  90  N.  C.  296 143 

Francis  v.  Slack,  4  Chff.  186,  Fed.  Cas.  5041, 16 1.  R.  R.  134 165 

Frayser  v.  Russell,  3  Hughes,  227,  Fed.  Cas.  5067 157 

Fresno  Home  Packing  Co.  v.  Turle  &  S.,  60  Misc.  79,  111  N.  Y. 

Supp.  839 85 

Frost  &  Dickenson  v.  Brisbin,  19  Wend.  11 ji 44 

G 

Gagerj;.Prout,480hioSt.89,  26N.E.  1013 18,  19 

Galm  V.  United  States,  39  Ct.  CI.  55 30 

Gates  I.  Co.  v.  Cohen,  7  Col.  App.  341, 43  P.  667 86 

Gehr  v.  Mont  Alto  Iron  Co.,  174  Pa.  St.  430, 34  A.  638 80 

Georgia  v.  Atkins,  35  Ga.  315, 1  Abb.  (U.  S.)  22,  Fed.  Cas.  5350, 82 

R.  R.  113, 1  Am.  L.  T.  (U.  S.)  105 25 

German  Savings  Bank  v.  Archbold,  15  Blatch.  398,  Fed.  Cas.  5364, 

rev'd,  104  U.  S.  708, 26  L.  Ed.  901, 24 1.  R.  R.  413 127 

Gilchrist  v.  Helena  Hot  Springs  and  Smelter  R.  Co.,  47  Fed.  593. . .  85 

Gillett  V.  Colquhoun,  33  Weekly  Reporter  258 63 

Ginn  v.  New  England  M.  S.  Co.,  92  Ala.  135,  8  So.  388 82 

Goerz  v.  Bell,  2  K.  B.  136,  90  L.  T.  R.  675 45 

Gotcheus  V.  Matheson,  61  N.  Y.  420 16 

Grant,  Collector  v.  N.  H.  &  H.  R.  Co.,  9  Blatch.  S.  43,  93  U.  S.  225 

100,  102 

Gray  v.  Darlington,  15  Wall.  63,  21  L.  Ed.  45 38 

Grcsham  Life  Ins.  Soc.  v.  Styles,  L.  R.  24  Q.  B.  D.  500 34 

H 

Haddam  Granite  Co.  v.  Brooklyn  Heights  R.  R.  Co.,  131  App.  Div. 

685, 116  N.Y.  Supp.  96 86 


Xll  TABLE   OF  CASES 

References  are  to  pages 

PAGE 

Haffin  V.  Mason,  15  Wall.  671,  21  L.  Ed.  196 138,  164 

Hahn  v.  United  States,  107  U.  S.  402,  27  L.  Ed.  527,  2  S.  Ct.  494. .     27 
Haight  V.  Pittsburg,  Ft.  W.  &  C.  R.  R.  Co.,  6  Wall.  15,  18  L.  Ed. 

818 21 

Hamilton  v.  Dillin,  13  I.  R.  R.  164,  Fed.  Cas.  5979,  afif'd,  21  Wall. 

73, 22  L.  Ed.  528 32 

Harding  v.  Woodcock,  137  U.  S.  43,  34  L.  Ed.  580,  11  S.  Ct.  6 

136,  160 

Hartman  v.  Greenhow,  102  U.  S.  675,  26  L.  Ed.  271 163 

Hartung  v.  People,  22  N.  Y.  95 16 

Harvard  Co.  v.  Wicht,  99  App.  Div.  507,  91  N.  Y.  Supp.  48. . . .     85 

Harvey  v.  United  States,  3  Ct.  CI.  38 30 

Hastings  v.  Herold,  184  Fed.  759 30,  164 

Hatch  V.  Ferguson,  57  Fed.  959 41 

Havens  &  Geddes  Co.  v.  Diamond,  93  111.  App.  557 83 

Hawker  v.  New  York,  170  U.  S.  189, 42  L.  Ed.  1002, 18  S.  Ct,  573. .    16 

Headman  v.  Rose,  63  Ga.  458 41 

Heidenbach  v.  Schland,  10  How.  Pr.  477 44 

Hendy  v.  Soule,  Deady  400,  Fed.  Cas.  6359 159,  163 

Hepburn  v.  Griswold,  8  Wall.  603, 19  L.  Ed.  513 11 

Herold  v.  Mutual  Benefit  Life  Ins.  Co.,  201  Fed.  918 80 

Hicks  V.  James,  48  Fed.  542,  afif'd,  110  U.  S.  272 166 

High  V.  Coyne,  178  U.  S.  1 1 1, 44  L.  Ed.  997, 20  S.  Ct.  747 12 

Hobbs,  Assignee  v.  McLean,  117  U.  S.  567,  29  L.  Ed.  940,  6  S.  Ct. 

870 25 

Hogan  V.  City  of  St.  Louis,  176  Mo.  149, 75  S.  W.  604 83 

Holy  Trinity  Church  v.  United  States,  143  U.  S.  457, 36  L.  Ed.  226, 

12  S.  Ct.  511 24 

Honeyman  v.  Colorado  Fuel  &  Iron  Co.,  133  Fed.  96 83 

Houghton  V.  Ault,  8  Abb.  Pr.  89, 16  How.  Pr.  77 44 

Howland  v.  Soule,  Deady  413,  Fed.  Cas.  6800 13,  158 

Hubbard  v.  Brainard,  35  Conn.  563,  rev'd,  12  Wall.  1,  20  L.  Ed. 

272 163 

Hubbard  v.  Kelly,  8  W.  Va.  46  160,  163,  164 

Hylton  V.  United  States,  3  Dall.  171 , 1  L.  Ed.  556 14 

I 

Imperial  Fire  Ins.  Co.  v.  Wilson,  35  L.  T.  R.  271 102,  114 

Improvement  Co.  v.  Slack,  100  U.  S.  654,  25  L.  Ed.  609 160 

Inland  Revenue  v.  Strang,  15  Sc.  L.  R.  704. 35,  36 

Ives,  Re,  Fed.  Cas.  7114,  1  I.  R.  R.  145 39 


TABLE   OF  CASES  :^ 

References  are  to  pages 

J  PAGE 

Jaehne  v.  New  York,  128  U.  S.  189,  32  L.  Ed.  398,  9  S.  Ct.  70,  6  N. 

Y.  Crim.  Rep.  237 19 

Jetton  V.  University  of  the  South,  208  U.  S.  489, 52  L.  Ed.  584. ...  162 
J.  L.  White  Furnace  Co.  v.  Miller  Transfer  Co.,  131  App.  Div.  559, 

115  N.  Y.  Supp.  625 85 

John  Deere  Plow  Co.  v.  Spatz,  69  Kan.  255, 76  P.  863 81 

John  Deere  Plow  Co.  v.  Wyland,  69  Kan.  255,  76  P.  863 81 

Johnson  v.  United  States,  7  Wall.  166,  19  L.  Ed.  187 157 

Jones  V.  Keeler,  40  Misc.  221,  81  N.  Y.  Supp.  648 85 

K 

Kelly  z;.  Owen,  7  Wall.  496, 19  L.  Ed.  283 42 

Kendall  v.  United  States,  107  U.  S.  123, 27  L.  Ed.  437, 2  S.  Ct.  277, 

18  Ct.  CI.  758 29 

Kendall  v.  United  States,  12  Pet.  524, 9  L.  Ed.  1181 163 

Kendall  v.  Stokes,  3  How.  (U.  S.)  87, 11  L.  Ed.  506 163 

Kensett  v.  Stivers,  18  Blatch.  397, 10  Fed.  517 31 

Kentucky  Railroad  Tax  Cases,  115  U.  S.  321, 29  L.  Ed.  414, 6  S.  Ct. 

57 11 

Kimball  v.  Weld,  Fed.  Cas.  7776 13 

King  V.  United  States,  99  U.  S.  229,  25  L.  Ed.  373 131,  150 

Kings  County  Savings  Bank  v.  Blair,  116  U.  S.  200,  29  L.  Ed.  657, 

6  S.  Ct.  353 155,  159 

Kinney,  Re,  102  Fed.  468 14 

Kirkwood  v.  Gadd,  1910  A.  C.  422 81 

Kissinger  v.  Bean,  7  Biss.  60,  Fed.  Cas.  7853.. 157,  158 

Klumpp  V.  Thomas,  162  Fed.  853 166 

Knowlton  v.  Moore,  178  U.  S.  41, 44  L.  Ed.  969, 20  S.  Ct.  747  .  11,  12,  26 
Knights  Templar  &c.  Co.  v.  Jarman,  187  U.  S.  197,  47  L.  Ed.  139, 

23  S.  Ct.  108 26 

Kring  v.  Missouri,  107  U.  S.  221,  27  L.  Ed.  506, 2  S.  Ct.  443 16 

L 

Lake  Shore  &  M.  S.  R.  R.  Co.  v.  People,  46  Mich.  193,  9  N.  W. 

249 132,  133,  164 

Lake  Shore  &  M.  S.  R.  R.  Co.  v.  Roach,  80  N.  Y.  339 136 

Lake  Shore  &  M.  S.  R.  R.  Co.  v.  Rose,  95  U.  S.  87, 24  L.  Ed.  376. . .    31 

Landis,  Est.  Re,  66  N.  J.  Eq.  291,  56  A.  1039 88 

Last  V.  London  Assurance  Corporation,  L.  R.  10  A.  C.  438 34,  80 

Lauer  v.  United  States,  5  Ct.  CI.  447 159,  160 

Lawless  v.  SuUivan,  L.  R.  6  A.  C.  373. 34 


XIV  TABLE   OF  CASES 

References  are  to  pages 

PAGE 

League  v.  Texas,  184  U.  S.  156, 46  L.  Ed.  478,  22  S.  Ct.  475 .  16, 17, 18 

Lee  V.  Chase,  1  Hughes  402,  Fed.  Cas.  8185 134,  138 

Legal  Tender  Cases,  12  Wall.  457,  20  L.  Ed.  287 11 

Leszynsky,  Re,  16  Blatch.  9,  Fed.  Cas.  8279,  25 1.  R.  R.  71,  7  Rep. 

358 29 

Lima  v.  Bidwell,  182  U.  S.  128, 45  L.  Ed.  1041, 21  S.  Ct.  743 164 

Lippman,  Re,  3  Ben.  95,  Fed.  Cas.  8382, 9 1.  R.  R.  1 124,  125 

Little  V.  Little,  161  Mass.  188,  36  N.  E.  795 38 

Lloyd  V.  Sully,  21  Sc.  L.  R.  482,  2  Tax  Cases,  37 45 

Locke  V.  Dane,  9  Mass.  360 16 

Locke  V.  New  Orleans,  4  Wall.  172,  18  L.  Ed.  334 17 

Logan  County  v.  United  States,  169  U.  S.  255,  42  L.  Ed.  737, 18  S. 

Ct.  361 90,92,  156,  157,  160,  164 

London  Bank  &c.  v.  Apthorpe,  1891  L.  R.,  2  Q.  B.  D.  378 63 

Long  V.  Ryan,  30  Grat.  Va.  718 44 

Louisville  Public  Warehouse  Co.  v.  Collector,  49  Fed.  561,  1  C.  C. 

A.  371 160 

Ludlam  v.  Ludlam,  31  Barb.  486,  aff'd,  26  N.  Y.  356, 84  Amer.  Dec. 

193 41 

Lynch  v.  Clarke,  1  Sand.  Ch.  583 42 

M 

McArthuTP.  United  States,  29  Ct.  CI.  191 160 

McClintock  v.  Dana,  106  Pa.  St.  386 34,  37 

McClung  V.  Silliman,  6  Wheat.  598,  5  L.  Ed.  340 162,  163 

McClure  v.  United  States,  19  Ct.  CI.  18-29 159 

McCray  v.  United  States,  195  U.  S.  27-56,  49  L.  Ed.  7&-95,  24  S. 

Ct.  796 10 

M'CuUoch  V.  Maryland,  4  Wheat.  316-332, 4  L.  Ed.  579-608 10 

M'Dougal  V.  Southerland,  1896  W.  N.  Eng.  Part  I,  113 39 

McGregor  v.  McGregor,  33  How.  Pr.  456 42 

McKee  v.  United  States,  164  U.  S.  287, 41  L.  Ed.  437, 17  S.  Ct.  92, 

32  Ct.  CI.  612 24 

McNally  v.  Field,  119  Fed.  445 28 

Magee  v.  Denton,  5  Blatch.  130,  Fed.  Cas.  8943 35,  49,  124 

Magoun  v.  IlUnois  T.  S.  Bank,  170  U.  S.  283, 42  L.  Ed.  1037, 18  S. 

Ct.  594 11 

Maillard  v.  Lawrence,  16  How.  (U.  S.)  251, 14  L.  Ed.  925 24 

Mallett  V.  North  Carolina,  181  U.  S.  589,  45  L.  Ed.  1015,  21  S.  Ct. 

730 16 

Mandell  v.  Pierce,  3  Cliff.  134,  Fed.  Cas.  9008,  2  Am.  L.  Rev.  774, 

1  Am.  L.  T.  Rep.  123,  7  I.  R.  R.  193. .34,  36,  49,  71 


TABLE   OF   CASES  XV 

References  are  to  pages 

PAGE 

Manhattan  Co.  v.  Blake,  148  U.  S.  412,  37  L.  Ed.  504,  13  S.  Ct. 

640 79 

Mann  v.  United  States,  32  Ct.  CI.  580 128,  165 

Mansfield  v.  Excelsior  Refining  Co.,  135  U.  S.  326,  34  L.  Ed.  162, 

10  S.  Ct.  825 143,  146 

Mason,  Re,  43  Fed.  510 125 

Mason  v.  Rollins,  2  Biss.  99,  Fed.  Cas.  9252 13 

Massachusetts,  Re,  197  U.  S.  482,  49  L.  Ed.  845, 25  S.  Ct.  512 161 

Matsons  Ford  Bridge  Co.  v.  Commonwealth,  117  Pa.  St.  265, 11  A. 

813 79 

Maxwell  v.  Griswold,  10  How.  (U.  S.)  242,  13  L.  Ed.  405 163 

Meador,  Re,  1  Abb.  (U.  S.)  317,  Fed.  Cas.  9375,  10  I.  R.  R.  74,  2 

Am.  L.  T.  Rep.  140-153,  3  West  Jur.  209,  5  Am.  L.  Rev.  166, 

2  Leg.  Gaz.  193 13,  125 

Meads  v.  United  States,  81  Fed.  684,  26  C.  C.  A.  229 30 

Medley,  Re,  134  U.  S.  160,  33  L.  Ed.  835,  10  S.  Ct.  384 16 

Memphis  &  Charleston  R.  R.  Co.  v.  United  States,  108  U.  S.  228, 

234,  27  L.  Ed.  711, 713, 2  S.  Ct.  482 15 

Mercer  v.  Buchanan,  132  Fed.  501-508 38 

Merck  v.  Treat,  174  Fed.  388 159,  166 

Mersey  Docks  &  Harbor  Board  v.  Lucas,  L.  R.,  8  A.  C.  891 34,  93 

Metz  V.  Hagerty,  51  0.  St.  521,  38  N.  E.  11 19 

Michigan  Central  R.  R.  Co.  v.  Slack,  22  L  R.  R.  337, 100  U.  S.  595, 

25  L.  Ed.  647 10,  20,  22,  127 

Milan  MiUing,  &c.  Co.  v.  Gorten,  93  Tenn.  590,  26  L.  R.  A.  135, 

27  S.  W.  971 83 

Miles  V.  Johnson,  59  Fed.  38 158 

MiUiken   v.   FuUerton,   101   App.   Div.  606,  91   N.   Y.   Supp. 

1104 85 

MinehiU  &  S.  H.  R.  Co.  v.  McCoach,  192  Fed.  670 84 

Minor  v.  Happersett,  21  Wall.  162, 22  L.  Ed.  627 41 

Moline  Plow  Co.  v.  Wilkinson,  105  Mich.  57, 62  N.  W.  1119 85 

Montclair  v.  Ramsdell,  107  U.  S.  147,  27  L.  Ed.  431,  2  S.  Ct. 

391 25 

Moore  v.  Miller,  5  A.  C.  (D.  C.)  413 11,  12 

Morgan  v.  White,  101  Ind.  413 43 

Morrill  V.  Jones,  106  U.  S.  466,  27  L.  Ed.  267,  1  S.  Ct.  423 30 

Mundy  v.  Van  Hoose,  104  Ga.  292,  37  S.  E.  783 51,  91 

Murphy  Varnish  Co.  v.  Connell,  10  Misc.  553,  32  N.  Y.  Supp.  492, 

65St.  Rep.  817 83 

Muskrat  v.  United  States,  219  U.  S.  350,  55  L.  Ed.  248 161 

Mutual  Benefit  Life  Ins.  Co.  v.  Herold,  198  Fed.  199 28,  100,  101 


XVI  TABLE   OF   CASES 

References  are  to  pages 

N  PAGE 

National  Bank  of  New  Brunswick  v.  County  of  Yankton,  101  U. 

S.  129, 25  L.  Ed.  1046 53 

National  Knitting  Co.  v.  Bronner,  20  Misc.  125, 45  N.  Y.  Supp.  714.    85 

Needham  v.  Bowers,  L.  R.  21  Q.  B.  D.  436 91 

Negley  v.  City  of  Henderson,  21  Ky.  L.  11.  1394,  55  S.  W.  554.  . .  88 
Nelson  v.  Carman,  5  Blatch.  511,  Fed.  Cas.  10103, 6 1.  R.  R.  181.  . .  163 
New  Brunswick  Bank  v.  Co.  of  Yankton,  101  U.  S.  129, 25  L.  Ed. 

1046 53 

New  Lamp  Chimney  Co.  v.  Ansonia  &c.  Co.,  91  U.  S.  656,  23  L. 

Ed.  336 * 26 

New  Orleans  v.  Houston,  119  U.  S.  265, 30  L.  Ed.  411,  7  S.  Ct.  198.  13 
New  York  Arch.  Terra  Cotta  Co.  v.  Williams,  102  App.  Div.  1,  92 

N.  Y.  Supp.  808,  aff 'd,  184  N.  Y.  579,  77  N.  E.  1 192 84 

New  York  Telephone  Co.  v.  Treat,  130  Fed.  340-367,  64  C.  C.  A. 

586 27 

New  Zealand  Shipping  Co.  v.  Stephens,  24  L.  T.  R.  172,  5  Tax  Cas. 

553 ." 45 

Nichols,  Re,  54  N.  Y.  62 45 

Nichols  V.  United  States,  7  Wall.  122,  19  L.  Ed.  125 159 

Nicol  V.  Ames,  173  U.  S.  509,  43  L.  Ed.  786,  19  S.  Ct.  522 11,  14 

Northrup  v.  Shook,  10  Blatch.  243,  Fed.  Cas.  10329, 16 1.  R.  R.  196, 

7  Am.  L.  Rev.  573 163 

Nixon  V.  United  States,  18  Ct.  CI.  448 155,  156,  161 

North  Carolina  v.  Kirkpatrick,  42  Fed.  689 162 

North  Carolina  ».Vanderford,  35  Fed.  282 162 

Northern  Central  R.  R.  Co.  v.  Jackson,  74  (U.  S.)  262, 19  L.  Ed.  88. 

Norton  v.  Union  Bank  &  Trust  Co.,  46  S.  W.  544 84 

Norton  v.  W.  H.  Thomas  &  Sons  Co.,  93  S.  W.  711 84 

Novelty  Mfg.  Co.  v.  Cornell,  88  Hun,  254,  34  N.  Y.  Supp.  717,  68 

St.  Rep.  697 85 

Nugent  V.  Bates,  51  la.  77, 50  N.  W.  76, 33  Amer.  St.  Rep- 117 44 

O 

O'Donoghue  v.  Akin,  63  Ky.  478 16 

Ogden  V.  Saunders,  12  Wheat.  213-285,  6  L.  Ed.  606-631 17 

Opinion  of  Justices,  5  Metcalfe  596 34 

Orr  V.  Oilman,  183  U.  S.  27,  846  L.  Ed.  196,  22  S.  Ct.  213 17 

Osterberg  v.  Union  Trust  Co.,  93  U.  S.  424,  23  L.  Ed.  964  .. .  135,  143 
Ozark  Cooperage  Co.  v.  Quaker  City  Cooperage  Co.,  98  N.  Y.  Supp. 

113, 112  App.  Div.  62 85 


Table  of  cases  Xvii 

References  are  to  pages 

P  PAGE 

Pacific  Building  &  Loan  Assn.  v.  Hartson,  201  Fed.  1011 88,  90 

Pacific  Exp.  Co.  v.  Siebert,  142  U.  S.  339,  35  L.  Ed.  1035, 12  S.  Ct. 

250 11,  12 

Pacific  Ins.  Co.  v.  Soule,  7  Wall.  433,  19  L.  Ed.  95 14,  35,  129 

Pacific  Steam  Whaling  Co.  v.  United  States,  187  U.  S.  447,  47  L. 

Ed.  253, 23  S.  Ct.  154 164 

Partridge  .v.  Mallandaine,  L.  R.,  28  Q.  B.  D.  276 35 

Parkview  B.  &  L.  Assn.  v.  Herold,  203  Fed.  876 88 

Pascal  V.  Sullivan,  21  Fed.  496 30 

Patton  V.  Brady,  184  U.  S.  608,  46  L.  Ed.  713,  22  S.  Ct.  493 12 

Peabody  v.  Stark,  16  Wall.  240,  21  L.  Ed.  311 27 

Pequignot  v.  Detroit,  16  Fed.  211 42 

Pennington  v.  Coxe,  2  Cranch,  33,  2  L.  Ed.  199 24,  25 

Pennoyer  v.  McConnaughty,  140  U.  S.  1,  35  L.  Ed.  363,  11  S.  Ct. 

699 27 

Pennsylvania  Collieries  Co.  v.  McKeever,  93  App.  Div.  303,  87  N. 

Y.  Supp.  869,  aff'd  183  N.  Y.  98, 2  L.  R.  A.  127, 74  N.  E.  935.  .  82 
Pennsylvania  Company  for  Insurance  of  Lives  v.  Bauerle,  143  111. 

459, 33  N.  E.  166 82 

Pennsylvania  Life  Insurance  Co.  v.  McClain,  105  Fed.  367 27 

Pennsylvania  Steel  Co.  v.  New  York  City  Ry.  Co.,  176  Fed.  471. 89,  113 
Pennsylvania  Steel  Co.  v.  New  York  City  Ry.  Co.,  193  Fed.  286; 

198  Fed.  774 :  90,  113 

People  V.  American  BeU  Telephone  Co.,  117  N.  Y.  241,  22  N.  E. 

1057 83 

People  V.  Austin,  47  Cal.  353 32 

People  V.  Miller,  181  N.  Y.  328,  73  N.  E.  1102 82 

People  V.  Purdy,  58  Hun.  386 88,  89 

People  V.  Seymour,  16  Cal.  332,  76  Amer.  Dec.  521. 18 

People  ex  rel.  Collins  v.  Spicer,  99  N.  Y.  225, 1 N.  E.  680 17 

People  ex  rel.  Hackley  v.  Kelly,  24  N.  Y.  74-83 124 

People  ex  rel  Lorillard  v.  Barker,  70  Hun,  397,  24  N.  Y.  Supp.  63, 

54  St.  Rep.  107 34,  45 

People  ex  rel.  Southern  Cotton  Oil  Co.  v.  Roberts,  25  App.  Div.  13, 

48  N.  Y.  Supp.  1028 84 

People  ex  rel.  McMasters  v.  Supervisors,  4  Hill  20.  . .' 34 

Perry  v.  Newsome,  10 1.  R.  R.  20,  Fed.  Cas.  1 1009 36 

Peters  v.  United  States,  33  P.  1031 30 

Petri  V.  Commercial  National  Bank,  142  U.  S.  644,  35  L.  Ed.  1144, 

12  S.  Ct.  325 25 

P:  iladelphia  v.  Diehl,  5  Wall.  720,  18  L.  Ed.  614 162,  165 


Xviii  TABLE   OF   CASES 

References  are  to  pages 

PAGE 

Philadelphia  &c.  R.  R.  Co.  v.  Kenney,  Fed  Cas.  1188,  9  Phila.  403, 

18 1.  R.  R.  92 27 

Phillips,  Re,  10 1.  R.  R.  107,  Fed.  Cas.  11097, 2  Am.  L.  T.  Rep.  154, 

1  Chic.  L.  N.  449, 16  Pitts.  L.  J.  189 14,  124 

Phoenix  Insurance  Co.  of  London  v.  Kingston,  7  Ont.  343 82 

Pollock  V.  Farmers  Loan  &  Trust  Co.,  157  U.  S.  429,  39  L.  Ed.  769, 

15  S.  Ct.  673,  158  U.  <B.  607,  39  L.  Ed.  1110,  15  S.  Ct.  912 

10,  15,  32 

Pommery  &  Greno  v.  Apthorpe,  L.  J.  R.  (1887)  N.  S.  56  Q.  B.  155 . .  43 

Pooler  V.  Maples,  1  Wend.  65 44 

Portland  Co.  v.  Hall  &  Grant  Con.  Co.,  121  App.  Div.  779,  106 

N.  Y.  Supp.  649 81 

Powers  V.  Barney,  5  Blatch.  202,  Fed.  Cas.  11361 28 

Powers  V.  Mass.  Hosp.,  109  Fed.  294 89 

Providence  Bank  v.  Billings,  4  Pet.  514,  7  L.  Ed.  939 12 

Pullan  V.  Kinsinger,  2  Abb.  (U.  S.)  94,  Fed.  Cas.  11463,  9  Am.  L. 

Reg.  (N.  S.)  557,  11  L  R.  R.  197,  5  Am.  L.  Rev.  184 13 

R 

R.  &  G.  R.  Co.  V.  Reid,  13  Wall.  269,  20  L.  Ed.  570 29 

Railroad  Company  v.  Jackson,  7  Wall.  262,  19  L.  Ed.  88 21 

Railroad  Company  v.  United  States,  101  U.  S.  543, 25  L.  Ed.  1068. .  151 

Raleigh  &  G.  R.  R.  Co.  v.  Reid,  13  Wall.  269,  20  L.  Ed.  570 29 

Ratzky  v.  People,  29  N.  Y.  124,  28  How.  Pr.  112 16 

Ray  V.  United  States,  50  Fed.  166 166 

Real  Estate  Savings  Bank  v.  United  States,  16  Ct.  CI.  335,  aflf'd  104 

U.  S.  728, 26  L.  Ed.  908 163 

Reed,  Re,  100  (U.  S.)  25,  25  L.  Ed.  538 30 

Reeder  v.  Holcomb,  105  Mass.  93 44 

Reiche  v.  Smythe,  13  Wall.  162,  20  L.  Ed.  566 24 

Religious  Tract  &  Book  Society  v.  Forbes,  1896  W.  N.  (Eng.)  Part 

1, 126 63 

Reynolds  v.  Williams,  4  Biss.  108,  Fed.  Cas.  11734 38 

Rice  V.  Minn.  &  N.  W.  R.  R.  Co.,  1  Black  358, 17  L.  Ed.  147 25 

Rice  V.  United  States,  53  Fed.  910,  4  C.  C.  A.  104 28 

Ridgway  v.  United  States,  18  Ct.  CI.  707 156 

Robertson  v.  Downing,  127  U.  S.  607, 32  L.  Ed.  269, 8  S.  Ct.  1328 . .  27 

Robbins  v.  Freeland,  Fed.  Cas.  11883, 14 1.  R.  R.  28 158 

Rock  Island  Plow  Co.  v.  Peterson,  93  Minn.  356, 101  N.  W.  616.  . . .  82 

Rodriguez,  Re,  81  Fed.  337, 353 41 

Rogers  v.  Inland  Revenue,  16  Sc.  L.  R.  682, 1  Tax  Cases,  225 44,  45 

Rose  V.  Barclay,  191  Pa.  St.  594, 43  A.  385, 45  L.  R.  A.  392 38 

Rosedale  Cemetery  Ass.  v.  Linder,  73  N.  J.  L.  421,  63  A.  904 88 

Rowland,  Re,  104  U.  S.  604,  612,  26  L.  Ed.  861 163 


TABLE  OF  CASES  XIX 
References  are  to  pages 

PAGE 

Ruckgaber  v.  Moote,  104  Fed.  gil?. 42 

Russell  V.  Bank,  13  App.  Cas.  418 101 

Ryan  v.  State,  5  Neb.  276 19 

S 

St.  Louis,  A.,  T.  R.  R.  Co.  v.  Fire  Assn.  of  Phila.,  55  Ark.  163, 

18  S.  W.  43 84 

St.  Louis  Expanded  M.  &  F.  Co.  v.  Beilharz,  88  S.  W.  512 81 

St.  Paul  M.  &  M.  R.  Co.  v.  Phelps,  137  U.  S.  528, 34  L.  Ed.  767, 11 

S.  Ct.  168 27 

San  Franciso  S.  &  L.  Soc.  v.  Carey,  17 1.  R.  R.  109 159 

Sasportas  v.  De  la  Motta,  10  Rich.  Eq.  38 41 

Satterlee  v.  Matthewson,  2  Pet.  380-415,  7  L.  Ed.  458-470 16 

Saunders  v.  Howard,  Fed.  Cas.  12375 26 

Sawyer,  Re,  124  U.  S.  200,  31  L.  Ed.  402,  8  S.  Ct.  482 16 

Society  for  Savings  v.  Coit,  6  Wall.  594,  18  L.  Ed.  897 12 

Schell  V,  Cochran,  107  U.  S.  625,  27  L.  Ed.  543 162 

Schell  V.  Fauche,  138  U.  S.  562,  34  L.  Ed.  1040,  11  S.  Ct.  376.  . .  27 

Schmidt  v.  Trowbridge,  24  I.  R.  R.  381 150 

Scholey  v.  Rew,  23  Wall.  331,  23  L.  Ed.  99 33 

Schriefer  v.  Wood,  5  Blatch.  215,  Fed.  Cas.  12481 24 

Schulenberg-Boeckler  Lumber  Co.  v.  Town  of  Hayward,  20  Fed. 

422 157 

Schwarzchild  &  Sulzberger  v.  Rucker,  143  Fed.  656 165 

Seat  V.  United  States,  18  Ct.  CI.  458. 156 

Shaefer  v.  Ketcham,  6  L  R.  R.  4 163 

Shanks  v.  Dupont,  3  Pet.  242,  7  L.  Ed.  395 41 

Sheridan  v.  Allen,  153  Fed.  568 140 

Simons  v.  United  Stateg,  19  Ct.  CI.  601 163 

Smith  V.  Hooper,  95  Md.  16,  51  A.  844,  54  A.  95 37 

Smith  V.  Stevens,  10  Wall.  321,  19  L.  Ed.  933 29 

Smythe  v.  Fiske,  23  Wall.  374,  23  L.  Ed.  47 24,  26,  28 

Snow  V.  United  States,  18  Wall.  317,  21  L.  Ed.  784 53 

Snyder  v.  Marks,  109  U.  S.  189,  27  L.  Ed.  901,  3  S.  Ct.  157 157 

Sourey  v.  Harbour  Moorings  Commissioners,  3  Times  L.  R.  516.  ...  93 
South  Carolina  v.  United  States,  199  U.  S.  437,  448,  50  L.  Ed.  261, 

■271,  26  S.  Ct.  110 9,  14,  93 

Southern  Pac.  R.  R.  Co.  v.  California,  118  U.  S.  109, 112,  30  L.  Ed. 

103,  6  S.  Ct.  993 161 

Southern  R.  Co.  v.  Kay,  62  S.  C.  28,  39  S.  E.  785 33 

Southwestern  R.  R.  Co.  v.  Wright,  116  U.  S.  231,  29  L.  Ed.  626, 

6  S.  Ct.  375 28 


XX  Table  of  cases 

References  are  to  pages 

PAGE 

Southwick  V.  Southwick,  49  N.  Y.  510 16 

Spooner  v.  PhiUips,  62  Conn.  62,  24  A.  524,  16  L.  R.  A.  461 37 

Spreckles  Sugar  R.  Co.  v.  McClain,  192  U.  S.  397,  48  L.  Ed.  496, 

24  S.  Ct.  326 79,  80 

Springer  v.  United  States,  102  U.  S.  586,  26  L.  Ed.  253. .  13, 15,  140, 142 

Sprinkle  v.  United  States,  141  Fed.  811,  73  C.  C.  A.  285 30 

Stacey  v.  Emery,  97  U.  S.  642,  24  L.  Ed.  1035 162 

Stamvood  v.  Green,  2  Abb.  (U.  S.  )184,  Fed.  Cas.  13331 125 

Starin  v.  New  York,  115  U.  S.  248,  29  L.  Ed.  388,  6  S.  Ct.  28. .. .  161 
State  V.  American  Book  Co.,  69  Kan.  1,  76,  P.  411,  1  L.  R.  A.  (N. 

S.)  1041 83 

State  V.  Bell,  61  N.  C.  76 18 

State  V.  Bristol  Savings  Bank,  108  Ala.  3 86 

State  V.  Jersey  City,  37  N.  J.  L.  39 133 

State  V.  Smith,  63  N.  E.  25 51 

Stewart  v.  Barnes,  153  U.  S.  456, 38  L.  Ed.  781, 14  S.  Ct.  849 162 

Stockdale  v.  Insurance  Cos.,  20  Wall.  323, 22  L.  Ed.  348 18, 22, 26 

Stockwell  V.  United  States,  3  Cliff.  284,  Fed.  Cas.  13446 13 

Stoddert  v.  Ward,  31  Md.  562,  100  Am.  Dec.  83 45 

Stotesbury  v.  United  States,  23  Ct.  CI.  285,  afif 'd  146  U.  S.  196,  36 

L.  Ed.  940,  13  S.  Ct.  1 30,  155,  156 

Strong  V.  Walton,  47  App.  Div.  114,  62  N.  Y.  Supp.  353 136 

Strouse,  Re,  1  Sawyer,  605,  Fed.  Cas.  13548 13,  29,  124 

Stuart  V.  Barnes,  43  Fed.  281 159 

Sturges  V.  Carter,  114  U.  S.  511,  21  L.  Ed.  240,  5  S.  Ct.  1014. ...     17 

SuUy  V.  Attorney  General,  5  H.  &  N.  711 43 

Swift  Co.  V.  United  States,  105  U.  S.  691,  26  L.  Ed.  1108 27 

Swift  Co.  V.  United  States,  111  U.  S.  22,  28  L.  Ed.  341,  4  S.  Ct.  244.  163 
Sybrandt  v.  United  States,  19  Ct.  CI.  461-466 156,  157 

T 

Tacey  v.  Irwin,  18  Wall.  549,  21  L.  Ed.  786 134,  138 

Tallapoosa  Lumber  Co.  v.  Holbert,  5  App.  Div.  559, 39  N.  Y.  Supp. 

432, 3.  N.  Y.  Ann.  Cas.  238 83 

Tappan  v.  Merchants  Exchange  National  Bank,  19  Wall.  490,  22  L. 

Ed.  189 11 

Taylor  v.  Boyd,  63  Tex.  533 .»    32 

Tenant  v.  Smith,  (1892)  App.  Cas.  161 39 

Tennessee  v.  Davis,  100  U.  S.  257,  25  L.  Ed.  648 161 

Tennessee  v.  Whitworth,  6  S.  Ct.  645, 1 17  U.  S.  129, 29  L.  Ed.  830.  .     13 

Thatcher  v.  United  States,  15  Blatch.  15,  Fed.  Cases  13851 30 

Thayer  v.  City  of  Boston,  124  Mass.  132,  26  Amer.  Rep.  650. .  .44,  45 


TABLE   OF   CASES  XXI 

References  are  to  pages 

PAGE 

The  Exchange  v.  McFaddon,  7  Cranch,  137, 3  L.  Ed.  294 42 

Thomas  v.  United  States,  192  U.  S.  363 14 

Thompson  v.  Utah,  18  S.  Ct.  620, 170  U.  S.  343, 42  L.  Ed.  1061 16 

Thorn  v.  De  Breteuil,  86  A.  D.  405-417,  83  N.  Y.  Supp.  849,  mod. 

179  N.  Y.  64, 71  N.  E.  470 34 

Tischler  &  Co.  v.  Apthorpe,  52  L.  T.  R.  N.  S.  814 43 

Toledo  Commercial  Co.  v.  Glen  Mfg.  Co.,  55  0.  St.  217,  45 

N.  E.  197 85 

Tomkins  v.  Ashley,  5  L.  J.  K.  B.  246 28 

Tompkins  v.  Little  Rock  &  Ft.  Scott  Ry.  Co.,  15  Fed.  6. 79 

Treat  v.  Farmers  Loan  &  Trust  Co.,  185  Fed.  760, 10  I.  R.  R.  57. . .  162 

Treat  v.  White,  181  U.  S.  267,  21  S.  Ct.  611,  45  L.  Ed.  853 24 

Troy  Iron  &  Nail  Factory  v.  Corning  Winslow,  45  Barb.  231,  247.  38 

U 

Union  Trust  Co.  v.  Sickles,  125  App.  Div.  105, 109  N.  Y.  Supp.  262.    83 
United  States  v.  Acorn  Roofing  Co.,  T.  D.  1784,  July  1,  1912. ...  Ill 

United  States  v.  Allen,  14  Fed.  263 30,  133 

United  States  v.  American  Bell  Telephone  Co.,  29  Fed.  17 81,  86 

United  States  v.  Anthony,  11  Blatch.  200,  30  Leg.  Int.  266,  Fed. 

Cas.  14459,  17  I.  R.  R.  197,  5  Chic.  L.  N.  462,  20  Pitts. 

L.  J.  199 41 

United  States  v.  Baltimore  &  Ohio  R.  R.  Co.,  17  Wall.  322,  21  L. 

Ed.  597  10,  11,  21,  92 

United  States  v.  Bank  of  America,  15  Fed.  730 150 

United  States  v.  Bank  of  Montreal,  21  Fed.  236 81 

United  States  v.  Barrows,  1  Abb.  (U.  S.)  351,  7  Phil.  609,  26  Leg. 

Int.  276,  Fed.  Cas.  14529,  10  T.  R.  R.  186,  3  Pitts.  Rep.  151, 

1  Chic.  L.  N.  409 30 

United  States  v.  Beebe,  127  U.  S.  338, 8  S.  Ct.  1083, 32  L.  Ed.  12 .  146, 147 
United  States  v.  Black,  11  Blatch.  538,  Fed.  Cas.  14600,  9  I. 

R.  R.  16 150 

United  States  v.  Black,  128  U.  S.  40, 9  S.  Ct.  12, 32  L.  Ed.  354 . .  150,  163 

United  States  v.  Bristow,  20  Fed.  378 133,  150 

United  States  v.  Brooklyn  City  &  N.  R.  R.  Co.,  14  Fed.  284 

127, 133, 150 
United  States  v.  Brown,  1  Sawyer  531,  Fed.  Cas.  14671, 13 1.  R.  R. 

126 124 

United  States  v.  Brown,  Deady  566,  Fed.  Cas.  14662 29 

United  States  v.  Buchanan,  9  Fed.  689, 4  Hughes  487 24 

United  States  v.  Central  National  Bank,  15  Fed.  222.  .  .  100,  103,  151 
United  States  v.  Chamberlain,  219  U.  S.  250,  55  L.  Ed.  204. .  127,  150 


XXll  TABLE   OF   CASES 

References  are  to  pages 

PAGE 

United  States  v.  Cole,  134  Fed.  697. 28,  150 

United  States  v.  Crosley,  196  U.  S.  327,  25  S.  Ct,  261, 49  L.  Ed.  497    24 

United  States  v.  Craft,  43  Fed.  374 151 

United  States  v.  Cummings,  130  U.  S.  452,  9  S.  Ct.  583,  32  L.  Ed. 

1029 162,  165 

United  States  v.  Curry,  201  Fed.  371 135 

United  States  v.  Davis,  54  Fed.  147,  4  C.  C.  A.  251 156 

United  States  v.  Distillery  No.  28,  6  Bliss  483,  2  Cent.  L.  J.  749, 

Fed.  Cas.  14966, 21 1.  R.  R.  366, 8  Chic.  L.  N.  57 19 

United  States  v.  Dollar  Sav.  Bank,  12 1.  R.  R.  157, 15 1.  R.  193. . . .  78 

United  States  v.  Dustin,  Fed.  Cas.  15012, 15 1.  R.  R.  30 33 

United  States  v.  Eliason,  16  Pet.  291, 10  L.  Ed.  968 30 

United  States  v.  Elliot,  Fed.  Cas.  15043 151 

United  States  v.  Erie  R.  R.  Co.,  106  U.  S.  327, 1  S.  Ct.  223,  24 1.  R. 

R.  76,  27  L.  Ed.  151 22,  127,  129 

United  States  v.  Finnell,  185  U.  S.  236,  22  S.  Ct.  633, 46  L.  Ed.  890.    27 

United  States  v.  Fordyce,  13 1.  R.  R.  77,  Fed.  Cas.  15130 125 

United  States  v.  Freeman,  3  How.  (U.  S.)  556, 11  L.  Ed.  724 24,  26 

United  States  v.  Frcrichs,  8  S.  Ct.  514, 124  U.  S.  315, 31  L.  Ed.  471.  162 
United  States  v.  Frost,  Fed.  Cas.  15172, 9 1.  R.  R.  41, 16  Pitts,  L.  J. 

196, 1  Chic.  L.  N.  129 37,  55 

United  States  v.  Gen.  Insp.  &  L.  Co.,  192  Fed.  223 90,  111 

United  States  v.  GiUer,  54  Fed.  656 29 

United  States  v.  Goldenberg,  18  S.  Ct.  3, 168  U.  S.  95, 42  L.  Ed.  394    24 

United  States  v.  Hadley,  99  Fed.  437 40 

United  States  v.  Halloran,  14  Blatch.  1,  11  Am.  L.  Rev.  379,  22  I. 

R.  R.  321, 14  Abb.  L.  J.  279,  Fed.  Cas.  15286, 24  Pitts.  L.  J.  39.  150 

United  States  v.  Hess,  5  Sawyer  533,  Fed.  Cas.  15358 142 

United  States  v.  Hill,  120  U.  S.  169, 7  S.  Ct.  510, 30  L.  Ed.  627 27 

United  States  v.  HiU,  123  U.  S.  681, 8  S.  Ct.  308, 31 L.  Ed.  275 33 

United  States  v.  Hodson,  14 1.  R.  R.  100,  Fed.  Cas.  15376 28 

United  States  v.  Howell,  9  Fed.  674;  20  Fed.  718 29,  53 

United  States  v.  Hughes,  8  Ben.  29,  Fed.  Cas.  15416, 11  Abb.  L.  J. 

199, 21 1.  R.  R.  84, 2  Am.  L.  T.  Rep.  (N.  S.)  300 19 

United  States  v.  Indianapolis  &  St  L.  R.  R.  Co.  ,5  S.  Ct.  716, 113  U. 

S.  711, 28  L.  Ed.  1140 18,  31 

United  States  v.  Insley,  9  S.  Ct.  485,  130  U.  S.  263,  32  L.  Ed.  968 

146, 151 

United  States  v.  Isham,  17  Wall.  496, 21  L.  Ed.  728 24,  28 

United  States  v.  Johnston,  8  S.  Ct.  446, 124  U.  S.  236, 31  L.  Ed.  389    27 

•United  States?;.  Kallstorm,  30  Fed.  184 26 

United  States  v.  Kaufman,  96  U.  S.  659,  24  L.  Ed.  792 156,  159 


TABLE   OF  CASES  Xxiii 

References  are  to  pages 

PAGE 

United  States  v.  Kenton,  2  Bond  97,  Fed.  Cas.  15526 27 

United  States  v.  Kirby,  7  Wall.  482, 19  L.  Ed.  278 26 

United  States  t).  Laescki,  29  Fed.  699 29 

United  States  v.  Lee,  1  S.  Ct.  240,  106  U.  S.  196,  27  L.  Ed.  171 

134,  137,  138 
United  States  v.  Little  Miami  R.  R.  Co.,  1  Fed.  700,  reversed  108 

U.  S.  277, 2  S.  Ct.  627,  27  L.  Ed.  724 99, 150 

United  States  v.  McGinnis,  1  Abb.  (U.  S.)  120,  Fed.  Cas.  15678, 

3 1.  R.  R.  83 129 

United  States  v.  Malone,  22  I.  R.  R.  403,  8  Ben.  574,  Fed.  Cas. 

15713 157 

United  States  v.  Mann,  95  U.  S.  580, 24  L.  Ed.  531 128 

United  States  v.  Mayer,  Deady  127, 7  I.  R.  R.  60,  Fed.  Cas.  15753 .  55,  58 

United  States  v.  Marquette,  H.  &  O.  R.  Co.,  17  Fed.  719 100 

United  States  v.  Military  Construction  Co.,  T.  D.  1774,  May  21, 

1912 110 

United  States  v.  Mooney,  116  U.  S.  106,  29  L.  Ed.  551,  6  S.  Ct. 

304 24,  161 

United  States  v.  Moore,  95  U.  S.  760, 24  L.  Ed.  588 27 

United  States  v.  Mosley,  Fed.  Cas.  15823, 15 1.  R.  R.  8 128 

United  States  v.  Mullins,  119  Fed.  334, 56  C.  C.  A.  238 ^     28 

United  States  v.  Myers,  3  Hughes  239-243,  24 1 R.  R.  44,  Fed.  Cas. 

15846,  5  Rep.  364,  25  Pitts.  L.  J.  143 131,  150,  159 

United  States  v.  Natl.  Surety  Co.,  122  Fed.  904, 59  C.  C.  A.  130.  . .     27 
United  States  v.  Nebraska  DistiUing  Co.,  80  Fed.  285,  25  C.  C.  A. 

418 151,  165 

United  States  v.  N.  Y.  N.  H.  &  H.  R.  R.  Co.,  10  Ben.  144,  Fed.  Cas. 

15874, 24 1.  R.  R.  341 151 

United  States  v.  New  York  Guaranty  &  Ind.  Co.,  8  Ben.  269,  Fed. 

Cas.  15872 127,  133,  151 

United  States  v.  Nipissing  Mines  Co.,  202  Fed.  803 99,  123 

United  States  v.  One  Black  Horse,  129  Fed.  167 29 

United  States  v.  One  Hundred  Bbls.  of  Spirit,  2  Abb.  305,  1  Dill. 

49, 3  Chic.  L.  N.  25,  Fed.  Cas.  15948, 12  L  R.  R.  153 29 

United  States  v.  One  thousand  four  hundred  and  twelve  Gals.  Dis- 
tilled spirits,  10  Blatch.  428,  Fed.  Cas.  15960, 17 1.  R.  R.  86.  .28,  29 

United  States  z^.  O'Neill,  19  Fed.  567 131 

United  States  v.  Oregon  &  C.  R.  R.  Co.,  164  U.  S.  526, 17  S.  Ct.  165, 

41 L.  Ed.  541 26 

United  States  v.  Pacific  R.  R.  Co.,  4  Dill.  66,  Fed.  Cas.,  15983 

134,  151 

United  States  v.  Pacific  R.  R.  Co.,  1  Fed.  97 135 

1. 


Xxiv  TABLE    OF  CASES 

References  are  to  pages 

PAGE! 

United  States  v.  Parkhill,  Fed.  Cas.  15994, 12  Weekly  Notes  604. .  128 
United  States  v.  The  Penelope,  2  Pet.  Adm.  438,  Fed.  Cas.  16024 . .  44 
United  States  v.  Philadelphia  &  R.  R.  Co.,  123  U.  S.  113, 8  S.  Ct.  77, 

31  L.  Ed  138 131,  150 

United  States  v.  Real  Estate  Savings  Bank,  104  U.  S.  728,  17  Ct. 

CI.  434,  26  L.  Ed.  908 160,  166 

United  States  v.  Reese,  92  U.  S.  214, 23  L.  Ed.  563 41 

United  States  tJ.  Rhawn,  11  Phil.  521,  22  I.  R.  R.  235,  2  Weekly 

Notes,  604,  Fed.  Cas.  16150,  33  Leg.  Int.  258,  8  Chic.  L.  N. 

372,  23  Pitts.  L.  J.  199 128 

United  States  v.  Rhindskopf,  105  U.  S.  418,  26  L.  Ed.  1131 150 

United  States  v.  Rindskopf,  8  Biss.  507,  Fed.  Cas.  16166,  8  Rep. 

426,  11  Chic.  L.  N.  376 131,  150 

United  States  v.  Ronzone,  14  Blatch.  69,  Fed.  Cas.  16192 38 

United  States  i'."  Savings  Bank,  104  U.  S.  728,  26  L.  Ed.  908 

155,  159,  160,  164 

United  States  v.  SchilUnger,  14  Blatch.  71,  Fed.  Cas.  16228 31 

United  States  v.  Schurz,  102  U.  S.  378, 26  L.  Ed.  167 162 

United  States  v.  Simons,  1  Abb.  (U.  S.)  470,  3  Pitts.  Rep.  261,  Fed. 

Cas.  16291, 12 1.  R.  R.  10, 7  Phil.  607, 18  Pitts.  L.  J.  60, 27  Leg. 

Int.  236,  5  Am.  L.  R.  187 38 

United  States  v.  Sixty-four  bbls.  of  Dist.  Spirits,  3  Cliff.  308,  Fed. 

Cas.  16306 135 

United  States  v.  Smith,  1  Sawyer,  277,  Fed.  Cas.  16341 36,  37,  39 

United  States  v.  Smith,  12 1.  R.  R.  135 38 

United  States  v.  Smock,  4 1.  R.  R.  202 25 

United  States  v.  Snyder,  149  U.  S.  210, 13  S.  Ct.  846, 37  L.  Ed.  705 .  135 
United  States  v.  Stowell,  133  U.  S.  1, 133  L.  Ed.  555, 10  S.  Ct.  244  28,  29 
United  States  v.  Tanner,  147  U.  S.  661,  28  Ct.  CI.  553,  37  L.  Ed. 

321,  13  S.  Ct.  436 27 

United  States  v.  Temple,  105  U.  S.  97, 26  L.  Ed.  967, 17  Ct.  CI.  436    24 

United  States  v.  The  Coquitlam,  57  Fed.  706 29 

United  States  v.  Thirty-six  Bbls.  High  Wines,  7  Blatch.  459,  Fed. 

Cas.  16468, 12  I.  R.  R.  40 28 

United  States  v.  Thompson,  98  U.  S.  486, 25  L.  Ed.  194 146 

United  States  v.  Three  Tons  Coal,  21 1.  R.  R.  251, 6  Biss.  379,  Fed. 

Cas.  16515 124 

United  States  v.  Tilden,  9  Ben.  368,  Fed.  Cas.  16519,  24  I.  R.  R. 

99 151 

United  States  v.  Tilden,  10  Ben.  566,  Fed.  Cas.  16522 123 

United  States  v.  Trans-Missouri  Freight  Assn.,  166  U.  S.  290,  41 

L.  Ed.  1007, 17  S.  Ct.  540 24 


TABLE   OF   CASES  XXV 

References  are  to  pages 

PAGE 

United  States  v.  Triplett,  Fed.  Cas.  16539,  22  I.  R.  R.  207,  3  Cent. 

Law.  J.  399 143 

United  States  v.  Twenty-eight  Casks  of  Wine,  2  Ben.  63,  Fed.  Cas* 

14281 28 

United  States  v.  Two  hundred  and  forty-six  and  one-half  lbs.  of 

tobacco,  103  Fed.  791 29 

United  States  v.  Vinson,  8  Fed.  507 29 

United  States  v.  Ward,  42  Fed.  320 40 

United  States  v.  Watts,  1  Bond  580,  Fed.  Cas.  16653, 1 1.  R.  R.  17 . .  27 
United  States  v.  Wigglesworth,  2  Story,  369,  Fed.  Cas.  16690.  ...     28 

United  States  v.  WiUetts,  5  Ben.  220,  Fed.  Cas.  16699 29 

United  States  v.  Wilson,  118  U.  S.  86, 30  L.  Ed.  110, 6  S.  Ct.  991. . .  135 
United  States  v.  Windom,  137  U.  S.  636, 34  L.  Ed.  811, 11 S.  Ct.  197  163 
United  States  v.  Wittig,  2  Low.  466,  23  Pitts.  L.  J.  151,  Fed.  Cas. 

16748, 22 1.  R.  R.  98, 3  Cent.  L.  J.  270, 13  Abb.  L.  J.  240 29 

United  States  v.  Wong  Kim  Ark,  169  U.  S.  649,  42  L.  Ed.  890,  18 

S.  Ct.  456 -. .  .40,  41,  42 

United  States  v.  Zemel,  137  Fed.  989. 30 

Utley  V.  Clark-Gardner  Lode  &  M.  Co.,  4  Col.  369 84 

V 

Van  Volkenburg  v.  Brown,  43  Cal.  43,  13  Am.  Rep.  136 41 

Vaughn  M.  Co.  v.  Lighthouse,  64  App.  Div.  138,  71  N.  Y.  Supp. 

799 85 

Veazie  Bank  v.  Fenno,  8  Wall.  533,  19  L.  Ed.  482 10, 14 

Vio  Chemical  Co.  v.  Studhohne,  53  Misc.  470,  103  Supp.  463 83 

W 

Walker  v.  Walker,  1  Mo.  App.  404 44 

Ward  V.  Maryland,  12  Wall.  427,  20  L.  Ed.  452 9 

Ware  v.  Wisner,  50  Fed.  310 40 

Warren  v.  United  States,  58  Fed.  559 25 

Warrington  v.  Furbor,  8  East.  242 25 

Washington  Loan  &  Trust  Co.  v.  United  States,  39  Ct.  CI.  152 165 

Watson  V.  Mercer,  8  Pet.  88-109,  8  L.  Ed.  876 16,  17 

Wayne  v.  United  States,  26  Ct.  CI.  274. 160 

Werle  &  Co.  v.  Colquhoun,  20  L.  R.  Q.  B.  D.  753 43 

West  Jersey  Ice  Mfg.  Co.  v.  Armour,  12  Pa.  Sup.  Ct.  443 81 

Western  Union  R.  R.  Co.  v.  United  States,  101  U.  S.  543, 25  L.  Ed. 

1068 18,  31 

Westfall  V.  Shook,  5  Blatch.  383,  Fed.  Cas.  17448, 1 L  R.  R.  54 12 


XXVI  TABLE   OF  CASES 

References  are  to  pages 

PAGE 

Weston  V.  Charlestown,  2  Pet.  449, 7  L.  Ed.  481 10 

White  V.  Arthur,  10  Fed.  80, 20  Blatch.  237 162 

White  V.  Clements,  39  Ga.  232 41 

Wilcox  V.  County  Commissioner,  103  Mass.  544 34 

Wilders  Steamship  Co.,  Re,  183  U.  S.  545,  46  L.  Ed.  321,  22  S.  Ct. 

225 133 

Williams  v.  Sangar,  10  East.  66 25 

Wilmington  Railroad  Co.  v.  Reid,  13  Wall.  264,  20  L.  Ed.  568 29 

Wihnot  V.  Mudge,  103  U.  S.  217, 26  L.  Ed.  536, 4  Ky.  L.  Rep.  82.  . .     25 

Wilson  V.  Ohio  &  M.  Ry.  Co.,  64  111.  542,  16  Am.  Rep.  565 16 

Wolf,  Dryer  Co.  v.  Bigler,  192  Pa.  St.  466,  43  A.  1092 86 

Woolner  v.  United  States,  13  Ct.  CI.  355-434 156, 161 

Wright  V.  Blakeslee,  101  U.  S.  174^180,  25  L.  Ed.  1048-1050.  .163, 165 
Wright  V.  Michigan  Cent.  R.  R.  Co.,  130  Fed.  843,  65  C.  C.  A.  327.     28 

Wrigley,  Inre,  8  Wend.  134 44 

Wroughton?;.  Turtle,  11 M.  &  W.  560 25 

Y 

Yazoo  &  M.  V.  R.  Co.  v.  Adams,  180  U.  S.  1,  45  L.  Ed.  395,  21 

S.  Ct.  240 28 

Young  V.  Solicitor,  12  Sc.  L.  R.  602, 1  Tax  Cas.  57 44, 45 

Z 

Zartarian  v.  Bilhngs,  204  U.  S.  170, 51  L.  Ed.  428 42 


PREFATORY  NOTE  AND  EXPLANATION 

This  work  has  been  designed  to  furnish  a  means  of 
convenient  reference  to  all  information  obtainable  upon 
the  many  difficult  questions  involved  in  the  practical 
application  of  the  Income  Tax  Act,  as  well  as  a  compila- 
tion of  all  authorities  believed  to  be  valuable  for  more 
serious  investigation. 

To  this  end,  it  has  been  deemed  proper  to  insert  in  the 
same  place  all  notes  upon  one  subject,  regardless  of  the 
fact  that  provisions  concerning  the  same  may  be,  and 
frequently  are  scattered  indiscriminately  throughout  the 
Act.  Due  regard  should,  therefore,  be  paid  to  cross- 
references  wherever  noted. 

Attention  is  also  called  to  the  fact  that  certain  of  the 
citations,  digested  for  purposes  of  simplification  in  the 
form  of  a  mere  categorical  statement,  necessarily  de- 
pended upon  the  wording  of  the  particular  statutes,  which 
will  be  found  in  the  Appendix,  and  which  should  be  con- 
sidered in  the  interpretation  and  application  of  these 
authorities  to  questions  arising  under  the  present  Act. 

Sections  3167,  3172,  3173  and  3176,  of  the  Revised 
Statutes  amended  by  this  Act,  have,  as  amended,  been 
included  in  order  to  preserve  the  sequence,  in  Chapter  V, 
which  contains  the  several  sections  of  the  Revised  Statutes 
relating  to  the  Income  Tax  and  its  collection. 

Under  Section  3226  are  included  all  notes  upon  actions 
and  proceedings  brought  against  the  United  States,  the 
Commissioner  of  Internal  Revenue,  or  the  Collector  of 
Taxes. 

Convenient  references  to  the  several  various  dates  and 
limitations  specified  in  the  Act,  and  to  the  various  penal- 
ties prescribed  therein  for  the  same  offense,  but  contained 

xxvii 


XXVm  PREFACE 

in  different  parts  thereof,  will  be  found  in  the  tables  at 
p.  302. 

In  examining  the  subjects  "Income,"  "Exemptions," 
and  "Deductions,"  particular  attention  should  be  paid 
to  the  cross-references  in  the  notes. 

Digest  of  citations  referred  to  in  leading  cases  is  gener- 
ally omitted,  except  where  such  citations  illustrate  a  point 
not  covered  in  the  leading  ease. 

Parallel  citations  to  unofficial  series,  where  not  appear- 
ing in  the  text,  will  be  found  in  the  Table  of  Citations. 

The  abbreviations  "T.  D.,"  "Op.  Atty.  Gen.,"  and 
"I.  R.  R.,"  refer,  respectively,  to  Treasury  Decisions 
(Internal  Revenue  Department) ;  Opinions  of  the  Attor- 
neys General;  and  Internal  Revenue  Reports. 

The  author  desires  to  recognize  with  grateful  apprecia- 
tion the  co-operation  and  assistance  of  his  associates, 
Mr.  William  Bell  Wait,  Jr.,  and  Mr.  Rufus  B.  Cowing,  Jr. 

Henry  Crofut  White. 


FEDERAL  INCOME  TAX 
LAW 

CHAPTER  I 

HISTORICAL 

Earliest  income  tax  acts 

The  earliest  European  income  taxes  were  those  imposed 
by  certain  mediaeval  towns  upon  the  earnings  of  artisans 
and  tradesmen.^ 

English  acts 

The  first  general  income  tax  act  was  passed  in  England, 
in  1799  (39  Geo.  3,  chaps.  13,  22),  and  was  succeeded  by  a 
number  of  acts  of  like  tenor,  of  which  the  following  are  the 
most  important :  ^ 

1803—43  Geo.  3,  c.  122. 
1805—45  Geo.  3,  c.  49. 
1806—46  Geo.  3,  c.  65. 
1842—5  &  6  Vict.,  c.  35. 
1853—16  &  17  Vict.,  c.  34. 
1869—32  &  33  Vict.,  c.  67. 
1887—50  &  51  Vict.,  c.  15. 
1894—57  &  58  Vict.,  c.  30. 
1897—60  &  61  Vict.,  c.  24. 
1898—61  &  62  Vict.,  c.  10. 
1907—7  Edw.  7,  c.  13. 
1910—10  Edw.  7,  c.  8,  1  Geo.  5,  c.  35. 

15  Pol.  Sc.  Q.  57. 

»Dowell,  English  Income  Tax  (1913),  pp.  IX,  1-14. 


2  FEDERAL  INCOME   TAX   LAW 

British  Colonial  Acts  ^ 

Australian  Commonwealth — No  national  or  federal 
act.    The  several  States  have  independent  local 
acts,  as  follows 
New  South  Wales— 1895. 
Queensland— 1902;  amended  1906-7. 
South  Australia— 1884,  1894;  amended  1908. 
Tasmania— 1902,  1910. 
Victoria— 1895.  ' 

Western  Australia — 1907. 
British  Columbia— 1903. 

Canada — No  general  income  tax  act,  but  Ontario 
and  a  few  towns  in  Alberta  have  partial  tax 
acts. 
Cape  of  Good  Hope— 1904. 
India— 1886. 

New  Zealand— 1891,  1897. 
St.  Vincent— 1905. 
Seychelles— 1900. 

Acts  in  other  foreign  countries  ^ 

Austria— 1702,  1849,  1896,  1898. 

Belgium — No  national  or  federal  act.    Many  of  the 

small  Communes  have  local  acts. 
Denmark— 1903. 
Finland — 1863,  1864 — Now  discontinued,  but  some 

of  the  cities  have  local  acts. 
France— 1871,  1907. 
Germany — ^No  national  or  federal  act.    Each  Duchy 

and  State  has  an  independent  local  act,  as  follows : 

*  Income  Taxation,  K.  K.  Keiinan,  1910;  Accounts  and  Papers, 
1905,  Vol.  42  (English  Parliamentary  Documents);  Report  from  the 
Select  Committee  on  Income  Tax  (English  Blue  Book),  Nov.,  1906, 
p  90;  Seligman  Essays  in  Taxation,  2nd  edition,  p.  314;  9  Pol.  Sc.  2, 
614:  1  Br.  Selec.  Par.  Papers  (1905),  Rep.  on  Inc.  Tax  in  Foreign 
Countries,  26  Cong.  Rec,  Pt.  I,  p.  584. 


HISTORICAL 

Alsace-Lorraine— 1892,  1901,  1905. 

Anhalt— 1894. 

Baden— 1884. 

Bavaria— 1881,  1899. 

Bremen— 1874,  1893,  1905. 

Brunswick— 1899. 

Hamburg— 1903,  1908. 

Hesse— 1899. 

Lippe-Detmold— 1894,  1903,  1905,  1907. 

Liibeck— 1889. 

Luxemburg — 1 89 1 . 

Mecklenburg-Schwerin — 1 903. 

Mecklenburg-Strelitz— 1905. 

Oldenburg— 1906,  1908. 

Prussia— 1811,  1891 ;  amended  1893,  1896,  1899. 

Reuss  (Older  Line)— 1893. 

Reuss  (Younger  Line) — 1898. 

Saxe-Altenburg— 1896,  1899,  1901. 

Saxe-Coburg— 1874,  1900. 

Saxe-Gotha— 1902,  1908. 

Saxe-Meiningen — 1 890. 

Saxe-Weimar— 1908,  1910. 

Saxony— 1878,  1894. 

Schaumburg-Lippe— 1901,  1904,  1905. 

Schwalzburg-Sondershausen — 1894,  1904. 

Schwarzburg-Rudolstadt— 1902,  1908. 

Waldeck— 1893. 

Wiirtemberg— 1852,  1903,  1905. 

Holland  (The  Netherlands)— 1892,  1893. 

Hungary— 1903. 

Italy— 1864,  1894,  1907. 

Japan  ^  —1899,  1904,  1905. 

Norway— 1882,  1899,  1911. 

Panama— 1904,  1909. 

Portugal — No  income  tax  proper. 

1  P'inancial  &  Economic  Annual,  Japan,  1901. 


4  federaC  income  tax  law 

Russia — No  national  or  federal  act,  but  many  of 
the  states  have  local  acts. 

Spain— 1896, 1900. 

Sweden— 1897,  1902. 

Switzerland — No  national  or  federal  act,  but  each 
of  the  Cantons  has  separate  local  acts  passed 
between  1892  and  1900,  as  follows: 
Aargan,  Appenzell,  Bale-campagne,  Bale-ville, 
Berne,  Friborg,  Orisons,  Geneva,  Neuchatel, 
Lucerne,  Schaffhausen,  Soleure,  St.  Gall,  Thur- 
gan,  Ticino,  Vallis,  Vaud,  Zug,  Ziirick. 

American  colonial  and  state  acts  ^ 

The  first  income  tax  act  in  the  American  colonies  was 
passed  by  the  Colony  of  Massachusetts  in  1634,  by  which 
taxes  were  to  be  levied  according  to  estate  and  ability.  ^ 
Other  colonial  acts  were  the  following :  ^ 
Alabama,  1844,  repealed  1884. 

Connecticut,  1649.    Assessments  apportioned  to  the 
estimated  gains  or  profits  arising  from  all  lucra- 
tive professions,  trades  and  occupations,  1771.* 
Repealed  1884. 
Delaware,  1869.    Tax  imposed  on  estimated  annual 
income;  and  gains  and  profits  of  certain  classes; 
and  ground  rents.  ^   Repealed  1 87 1 . 
Florida,  1845.    Repealed  1855. 
Georgia,   1797,   1863.     Tax  imposed  upon  persons 
conducting   specified   professions   or   business.® 
Repealed  1866. 

1  Income  Taxation,  K.  K.  Kennan,  1910;  The  Income  Tax,  Selig- 
man,  1913;  The  Income  Tax  in  the  Commonwealths  of  the  U.  S.  (Vol. 
42,  1903,  Pub.  Amer.  Econ.  Assn.,  320  series),  D.  O.  Kinsman;  The 
Present  Period  of  Income  Tax  Activity,  &c.,  23  Q.  J.  Econ.  (1909), 
p.  296. 

2  5  Pol.  Sc.  Q.  57-8;  1  Mass.  Col.  Rec.  (Shuriileflf)  120. 

3  Pollock  V.  Farmers'  L.  &  T.  Co.,  158  U.  S.  607. 

*  1  Conn.  Col.  Rec.  548,  559. 
6  7  Am .  St.  Papers  1  Fin  .429. 

•  Watkins'  Dig.  Laws  Ga.  (1800)  646. 


HISTORICAL  5 

Hawaii,  1901. 

Kentucky,  1867.    Repealed  1871. 

Louisiana,  1865.    Repealed  1910.    Allowed  to  lapse 

since  1900. 
Maryland,  1777,  1842.     Tax  imposed  upon  annual 

income  or  profit  of  persons  holding  public  office; 

conducting    certain    specified    professions    and 

occupations;  or  receiving  annuity  or  stipend.^ 

Repealed  1850. 
Massachusetts  Colony,    1635.     Tax  imposed  upon 

persons  according  to  whole  ability.^ 
Massachusetts  Colony,   1646.     Tax  imposed  upon 

specified  classes  of  tradesmen  to  be  rated  for 

returns  and  gains. ^    1695,  1780. 
Massachusetts,  1843,  1882,  1888,  1902.     Tax  upon 

income  from  certain  sources.* 
Missouri,  1861.    Repealed  1866. 
New  Hampshire,  1719,  1772.    Tax  on  general  abihty. 
New  Jersey,  1684,  17^5.    Tax  imposed  upon  persons 

following  any   trade  or  merchandizing,   to   be 

assessed  according  to  discretion  of  assessor.^ 
North  Carolina,  1849,  1893,  1907.6 
Oklahoma,  1908. 
Pennsylvania,  1782.    Offices,  posts  of  profit,  trades 

and  occupations  to  be  rated  at  discretion  of 

assessors    with    reference    to    their    respective 

profits,  1841.    Repealed  1871.^ 

1  Md.  L.  1777,  ch.  22,  35-6. 

2  5  Pol.  Sc.  Q.  57;  1  Mass.  Col.  Rec.  (Shurtleff)  166. 

» 2  Col.  Rec.  of  Mass.  Bay,  173,  213;  3  Col.  Rec.  of  Mass.  Bay,  88; 
Charters  &  Gen.  Laws  of  Mass,  (1814)  70.  • 

<  1  Mass.  Rev.  Stat.  206,  sec.  4. 

« N.  J.  Laws,  1664-1702  (Jenning  &  Spicer)  494;  N.  J.  Laws,  1732 
(Kinzey)  171. 

« N.  C.  Acts  1848-9,  c.  77,  p.  129;  Laws  1907,  c.  256— Pell's  Re- 
visal,  1908,  §§  5127  et  seq. 

■  2  Dallas'  Digest,  8. 


6  FEDERAL  INCOME  TAX  LAW 

Plymouth  Colony,  1643,  1689.  Persons  to  be  taxed 
according  to  goods,  faculties  and  personal 
abilities.^ 

Rhode  Island,  1673.  Repealed  1750,  1774.  Tax  im- 
posed upon  all  persons  who  profit  by  their  facul- 
ties and  rated  accordingly.^ 

South  Carolina,  1701,  1758,  1700,  1838,  1902.  Per- 
sons to  be  taxed,  among  other  things,  on  abilities 
and  profits  from  office  or  employment.^ 

Tennessee,  1883,  1895.  Tax  upon  income  from  cer- 
tain sources.^ 

Texas,  1863.  Repealed  1871.  Tax  upon  receipts  of 
certain  corporations  and  occupations,  1907.'' 

Vermont,  1779,  1797.  Assessments  proportioned 
to  the  profits  of  specified  professions  and  busi- 
ness.^ 

Virginia,  1777,  1782,  1786.  Tax  imposed  upon  per- 
sons conducting  specified  business  and  profes- 
sions,^  1843, 1849, 1903, 1908, 1910.8 

West  Virginia,  1863.    Repealed  1864. 

Wisconsin,  1911. 

Southern  Confederacy,  1861  ^ 

Federal  acts 

1794 — "An  act  laying  duties  upon  carriages  for  the 
conveyance  of  persons."  Chap.  XLV,  Laws  of 
1794,  approved  June  5,  1794.^" 

1  4  Plymouth  Col.  Rec.  (Pulsifer)  102;  6  Plymouth  Col.  Rec.  22. 
=  R.  I.  Acts  &  L.,  Newport,  1845,  p.  295;   3  R.  I.  Col.  Rec.  300;  2 
R.  I.  Col.  Rec.  510;  cp.  1  New  Haven  Col.  I^ec.  494.  ^ 

="  Cooper,  Stat,  at  L.,  ss.  2,  36,  183. 
*  Tenn.  Laws  1895,  c.  120,  sec.  9,  subsec.  10. 
5  Tex.  Laws  1907,  p.  497,  §§  1-24. 
« Vt.  Laws  (1798)  p.  565. 

'  12  Henning's  Stat.  283;  13  Henning's  Stat.  114. 
8  Va.  Tax  Bill,  Apr.  16,  1903,  as  amended  by  Laws  1910,  p.  487. 
» Inc.  Taxation,  Kennan;  Inc.  Tax  Act,  Seligman. 
M  1  Stat.  373. 


HISTORICAL  .  7 

1796 — Same    act,    as    amended,    Chap.    XXXVII, 
Laws  of  1796,  approved  May  28.^ 
The  above  statutes,  although  not  properly  income  tax 
acts,  are  here  noted  because  frequently  referred  to  in 
cases  considering  this  subject. 

1861 — "An  act  to  provide  increased  revenue  from 
imports,  to  pay  interest  on  the  public  debt,  and 
for  other  purposes."  Chap.  XLV,  Laws  1861, 
approved  Aug.  5.^ 

1862 — "An  act  to  provide  internal  revenue  to  sup- 
port the  government  and  to  pay  interest  on  the 
public  debt."  Chap.  CXIX,  Laws  1862,  ap- 
proved July  1.^ 

1863 — "An  act  to  amend  'An  act  to  provide  internal 
revenue  to  support  the  government  and  to  pay 
interest  on  the  public  debt,'  approved  July  1, 
1862,  and  for  other  purposes."  Chap.  LXXIV, 
Laws  1863,  approved  March  3.* 

1864 — "An  act  to  provide  internal  revenue  to  support 
the  government,  to  pay  interest  on  the  public 
debt,  and  for  other  purposes."  Chap.  CLXXIII, 
Laws  1864,  approved  June  30.^ 

1864 — ^Joint  resolution  imposing  special  income  duty. 
July  4,  1864.6 

1865 — "An  act  to  amend  'An  act  to  provide  internal 
revenue  to  support  the  government,  to  pay 
interest  on  the  public  debt,  and  for  other 
purposes,'  approved  June  30,  1864."  Chap. 
LXXVIII,  Laws  1865,  approved  March  3,' 

1866 — "An  act  to  declare  the  meaning  of  certain 
parts  of  the  internal  revenue  act,  approved 
June  30,  1864,  and  for  other  purposes."  Chap. 
XV,  Laws  1866,  approved  March  10.^ 

» U.  S.  Laws  1796,  p.  95.  ^  13  Stat.  223. 

2 12  Stat.  292.  e  13  u.  S.  Stat.  417. 

3 12  Stat.  432.  » 13  Stat.  469. 

*  12  Stat.  713.  8 14  Stat.  4. 


FEDERAL  INCOME  TAX  LAW 

1866 — "An  act  to  reduce  internal  taxation  and  to 
amend  'An  act  to  provide  internal  revenue  to 
support  the  government,  to  pay  interest  on  the 
public  debt,  and  for  other  purposes,'  approved 
June  30,  1864."  Chap.  CLXXXIV,  Laws  1866, 
approved  July  13.^ 

1867 — "An  act  to  amend  existing  laws  relating  to 
internal  revenue  and  for  other  purposes."  Chap. 
CLXIX,  Laws  1867,  approved  March  2.^ 

1870 — "An  act  to  reduce  internal  taxes  and  for  other 
purposes."  Chap.  CCLV,  Laws  1870,  approved 
July  14.3 

1894 — "An  act  to  reduce  taxation,  to  provide  revenue 
for  the  government,  and  for  other  purposes." 
Chap.  CCCXLIX,  Laws  1894,  approved  Aug. 

1895 — Joint  resolution  extending  time  to  file  returns. 

Feb.  21,  1895.^ 
1909 — "An  act  to  provide  revenue,  equalize  duties, 

and   encourage   the   industries   of   the   United 

States,   and   for  other  purposes."     Chap.   VI, 

Laws  1909,  approved  Aug.  5.^ 
1913 — "An  act  to  reduce  tariff  duties,  and  to  provide 

revenue    for    the    government,    and    for   other 

purposes."     Chap.  XVI,  Laws  1913,  approved 

Oct.  3,  1913.7 

» 14  Stat.  98.  ••  28  Stat.  509. 

M4  Stat.  471.  <*  28  Stat.  971. 

» 16  Stat.  256.  •  36  Stat.  112. 

'  38  Stat.  Ch.  16. 


CHAPTER  II 


CONSTITUTIONALITY 


Constitutional  power  to  tax.    Limitations 

Congress  has,  without  question,  always  possessed  con- 
stitutional power  to  levy  and  collect  taxes  of  every  nature, 
extending  to  all  usual  taxable  objects;  and  to  pass  all  laws 
necessary  therefor,  subject  only  to  the  limitation  that  it 
might  not  tax  exports,  and  to  the  qualifications  that  every 
tax  must  be  uniform,  and  that  every  direct  tax  must  be 
imposed  by  apportionment  among  the  states  according  to 
their  respective  population.* 

A  Umitation  is  also  indirectly  imposed  by  the  special 
provision  of  the  Constitution  that  the  compensation  of 
neither  the  President  nor  the  federal  judges  shall  be  dimin- 
ished during  their  period  of  office.- 

A  further  limitation  has  been  declared  by  the  courts — 
that  Congress  cannot  by  taxation,  or  otherwise,  interfere 
with  the  exercise  by  the  several  states  of  their  sovereign 
powers,  which  powers  are  absolute  within  their  respective 
domains,^  and  that  it  cannot,  therefore,  constitutionally 
impose  a  tax  upon  the  compensation  of  the  officers  or  em- 

1  U.  S.  Cons.,  Art.  I,  sec.  8,  par.  1;  Art.  I,  sec.  2,  par.  3;  McCray  v. 
United  States,  195  U.  S.  56,  49  L.  Ed.  95,  24  S.  Ct.  796;  Pacific  Ins. 
Co.  V.  Soule,  7  Wall.  433,  19  L.  Ed.  95;  Cyc.  "Internal  Revenue 
Tax";  27  A.  &  E.  Enc.  586-7;  Ward  v.  Maryland,  12  Wall.  427,  20 
L.  Ed.  452. 

"U.  S.  Cons.,  Art.  II,  sec.  1,  par.  7;  Art.  Ill,  sec.  1. 

'  U.  S.  Cons.,  Art.  X;  South  Carolina  v.  United  States,  199  U.  S.  448, 
50  L.  Ed.  464,  26  S.  Ct.  IJO. 

9 


10  FEDERAL  INCOME  TAX  LAW 

ployes,^  or  upon  the  financial  obligations  or  income  ^  of  a 
state  or  any  political  subdivision  thereof. 

Subject  to  these  limitations,  the  power  of  Congress  is 
absolute;  and  the  question  as  to  whether  a  tax  is  wise,  rea- 
sonable, excessive,  or  oppressive  is  not  a  matter  of  judicial 
inquiry.^ 

Impairment  of  contracts 

The  constitutional  prohibition  of  laws  impairing  the 
obligation  of  a  contract  extends  only  to  state  and  not  to 
federal  enactments,^  An  existing  contract  between  in- 
dividuals or  between  the  State  and  an  individual  cannot, 
therefore,  be  set  up  to  defeat  a  tax.^ 

Payment  of  tax  at  the  source 

From  this  rule,  and  from  the  inherent  power  of  Congress 
to  enact  all  necessary  laws  to  carry  into  effect  any  tax 
which  it  may  constitutionally  enact,^  it  would  seem  to 
follow  that  the  provision  for  payment  of  taxes  upon  income 
by  the  "source"  is  not  unconstitutional.  Such  provisions 
have  in  fact  been  upheld,"  even  where  the  tax  was  to  be 
paid  by  the  source  out  of  any  funds  then  or  thereafter 
coming  into  its  possession,^  the  source  being  constituted 

»  Collector  v.  Day,  11  WaU.  113,  20  L.  Ed.  122;  United  States  v.  B. 
&  O.  R.  R.  Co.,  17  Wall.  322,  21  L.  Ed.  597;  Weston  v.  Charlesto\\Ti, 
2  Pet.  449,  7  L.  Ed.  481;  McCuUoch  v.  Maryland,  4  Wheat.  432,  4 
L.  Ed.  582. 

2  United  States  v.  B.  &  O.  R.  R.  Co.,  17  Wall.  322,  21  L.  Ed.  597; 
Pollock  V.  Farmers'  Loan  &  Trust  Co.,  157  U.  S.  429,  561,  39  L.  Ed. 
759-812,  15  S.  Ct.  673. 

»  McCray  v.  United  States,  195  U.  S.  27,  49  L.  Ed.  78,  24  S.  Ct.  796; 
Veazie  Bank  v.  Fenno,  8  Wall.  533, 19  L.  Ed.  482. 

*  U.  S.  Cons.,  Art.  I,  sec.  10,  par.  1. 

'  Mich.  Cen.  R.  R.  v.  Slack,  22  I.  R.  R.  337,  affd.  100  U.  S.  595,  25 
L.  Ed.  647. 

•  1  Cooley,  Taxation,  3d  Ed.,  p.  54. 

'  First.  Natl.  Bank  v.  Kentucky,  9  Wall.  353, 19  L.  Ed.  701. 
« Cummings  v.  Mchts.  Natl.  Bank  of  Toledo,  101  U.  S.  153,  25  L 
Ed.  903. 


CONSTITUTIONALITY  11 

the  agent  of  the  government  for  the  collection  of  the 
tax.* 

Uniformity  of  taxation 

Uniformity  of  taxation,  as  required  by  the  constitution, 
demands  only  that  the  same  plan  and  method  shall  be 
operative  throughout  the  United  States.  ^ 

In  general,  the  requirement  is  satisfied  if  the  tax  is 
uniform  throughout  the  territory  affected.^ 

Any  reasonable  classification  may  be  adopted,  and  the 
rates  and  modes  of  taxation  of  such  classes  need  not  be 
uniform,"*  provided  property  similarly  situated  is  taxed 
at  the  same  rate,^  and  there  is  no  distinction  between 
members  in  the  same  class.^ 

The  Supreme  Court  has,  in  fact,  gone  so  far  as  to  declare 
that  an  assessment  which  imposed  the  same  tax  upon 
every  species  of  property,  irrespective  of  its  nature,  con- 
dition or  class,  would  be  destructive  of  the  principle  of 
uniformity  and  equality  in  taxation,  and  of  a  just  adapta- 
tion of  property  to  its  burden.^ 

Uniformity  of  exemption 

The  same  rule  is  held  regarding  the  classification  of 

1  United  States  v.  B.  &  O.  R.  R.,  17  Wall.  322,  21  L.  Ed.  597. 

2Edye  v.  Robertson,  112  U.  S.  580,  28  L.  Ed.  798,  5  S.  Ct.  247; 
Knowlton  v.  Moore,  178  U.  S.  41,  44  L.  Ed.  969,  20  S.  Ct.  747;  Moore 
V.  Miller,  5  A.  C.  (D.  C.)  413;  Nicol  v.  Ames,  173  U.  S.  509,  19  S.  Ct. 
522,  43  L.  Ed.  786;  Tappan  v.  Mchts.  Natl.  Bank,  19  Wall.  490,  22 
L.  Ed.  189;  Legal  Tender  Cases,  12  Wall.  457,  20  L.  Ed.  314;  Hepburn 
V.  Griswold,  8  Wall.  603, 19  L.  Ed.  513. 

« 27  A.  &  E.  Enc.  595. 

*  Commonwealth  ?'.  Germania  Brewing  Co.,  145  Pa.  St.  83,  22  A. 
240;  Commonwealth  v.  Sharon  Coal  Co.,  164  Pa.  St.  284,  30  A.  127; 
Ky.  Ry.  Cases,  115  U.  S.  321,  29  L.  Ed.  414,  6  S.  Ct.  57;  Magomi  v. 
Bank,  170  U.  S.  283,  42  L.  Ed.  1038,  18  S.  Ct.  594;  Cooley,  Taxation, 
3d  Ed.  260. 

s  27  A.  &E.  Enc.  600. 

•  Bell's  Gap  R.  R.  Co.  v.  Pennsylvania,  134  U.  S.  232,  33  L.  Ed.  892. 
'  Pac.  Express  Co.  v.  Siebert,  142  U.  S.  339,  12  S.  Ct.  250,  35  L.  Ed. 

1038,  12  S.  Ct.  250. 


12  FEDERAL   INCOME   TAX   LAW 

exemptions  from  taxation.^  Thus,  for  example,  the 
exemption  of  charitable  and  educational  institutions  - 
and  the  exemption  of  the  salaries  of  state  officers  and 
employes  ^  are  held  not  to  offend  against  the  rule  of 
uniformity.  It  is  apprehended  that  if  an  exemption  were 
so  disproportionate  as  to  be  utterly  unreasonable,  the 
imposition  of  a  tax  upon  persons  or  property  not  so 
exempted  might  be  held  confiscatory — the  taking  of 
property  without  due  process. 

The  fact  that  taxes  may  vary  by  reason  of  the  imperfect 
knowledge  or  judgment  of  the  assessor  does  not  render 
the  act  unconstitutional,  for  taxes  are  uniform  when  they 
are  so  imposed  upon  the  subjects  of  a  given  class  as  to 
make  the  same  amount  payable  upon  values  held  to  be 
the  same  by  the  proper  official  in  the  exercise  of  his  rea- 
sonable judgment.^ 

The  only  exception  to  this  principle  may  be  where 
an  inequality  in  the  enforcement  of  the  act  is  so  great  as  to 
be  presumed  intentional.^ 

Double  taxation 

It  is  also  well  established  that  an  act  is  not  unconstitu- 
tional which  results  in  double  taxation,^  particularly  where 

1  Pac.  Exp.  Co.  V.  Siebert,  142  U.  S.  339,  12  S.  Ct.  250,  35  L.  Ed. 
1038;  Knowlton  v.  Moore,  178  U.  S.  83,  20  S.  Ct.  747,  44  L.  Ed.  986; 
Cooley,  Taxation,  3d  Ed.  262,  269-273,  343,  356;  High  v.  Coyne,  178 
U.  S.  Ill,  20  S.  Ct.  747,  44  L.  Ed.  997;  Fidelity,  etc.,  Ins.  Co.  v.  Mc- 
Lain,  178  U.  S.  113,  44  L.  Ed.  998;  City  of  New  Orleans  v.  Davidson, 
30  La.  Ann.  554;  Flint  v.  Stone,  Tracey  &  Co.,  220  U.  S.  107,  55  L. 
Ed.  389. 

2  25  A,  &  E.  Enc.  163,  169;  Cooley,  Taxation,  3d  Ed.  354. 
8  Collector  v.  Day,  11  Wall.  113,  20  L.  Ed.  122. 

*  Commonwealth  v.  Del.  Co.,  123  Pa.  St.  602, 16  A.  584, 2  L.  R.  A.  798. 

6  27  A.  &  E.  Enc.  599. 

«  Patton  V.  Brady,  184  U.  S.  608,  22  S.  Ct.  493,  46  L.  Ed.  713;  West- 
fall  V.  Shook,  5  Blatch.  383,  Fed.  Cas.  17448;  Society  for  Savings  v.  Coit, 
6  Wall.  594,  18  L.  Ed.  897;  Providence  Bk.  v.  Billings,  4  Pet.  514,  7 
L.  Ed.  939;  Moore  v.  Miller,  5  A.  C.  (D.  C.)  413;  Cooley  on  Tax.,  3d 
Ed.  392. 


CONSTITUTIONALITY  13. 

no  real  substantial  inequality  of  burden  is  occasioned 
thereby.^ 

The  rule  against  double  taxation  applies  in  any  event 
to  a  property  tax  based  on  values,  and  not  to  income 
taxes.  2 


Due  process,  etc. 

It  has  also  been  held  that  the  provisions  of  the  revenue 
laws  for  distraint  of  property  for  the  payment  of  taxes, ^ 
or  the  grant  of  power  to  a  collector  to  require  the  produc- 
tion of  books  for  examination,^  or  to  enter  a  building 
or  place  where  taxable  articles  or  objects  are  kept,^ 
or  to  impose  the  statutory  penalties^  did  not  offend 
against  the  constitutional  guaranty  of  due  process  of  law, 
or  constitute  a  grant  of  judicial  powers  to  an  admin- 
istrative officer.' 

The  prohibition  of  any  action  to  restrain  either  assess- 
ment or  collection  of  taxes  (Rev.  Stat.,  §  3224)  has  also 
been  held  constitutional.^ 

On  the  other  hand,  the  requirement  for  the  production 
of  private  books  and  papers  has  been  held  unconstitu- 

1 27  A.  &  E.  Enc.  608,  citing  Davidson  v.  New  Orleans,  96  U.  S,  97, 
21  L.  Ed.  616;  Tennessee  v.  Whitworth,  117  U.  S.  129,  6  S.  Ct.  645,  29 
L.  Ed.  830;  New  Orleans  v.  Houston,  119  U.  S.  265,  7  S.  Ct.  198,  30 
L.  Ed.  411 

2  27  A.  &  E.  Enc.  610. 

5  Springer  v.  United  States,  102  U.  S.  586,  26  L.  Ed.  253;  Mason 
V.  Rollins,  Fed.  Cas.  9252,  2  Biss.  99. 

*  Re  Meadow  (Meador)  &  Bros.,  Fed.  Cas.  9375,  1  Abb.  (U.  S.) 
317,  10  I.  R.  R.  74. 

5  Kimball  v.  Weld,  Fed.  Cas.  7776;  Stockwell  v.  United  States,  3 
Clif.  284. 

6  Doll  V.  Evans,  9  Phila.  364,  Fed.  Cas.  3969;  Flint  v.  Stone  Tracy 
Co.,  220  U.  S.  107,  55  L.  Ed.  389. 

7  Re  Meador,  1  Abb.  (U.  S.),  317,  Fed.  Cas.  9375;  Re  Strouse,  1 
Sawy.  605,  Fed.  Cas.  13548. 

8  Rowland  v.  Soule,  Deady,  413,  Fed.  Cas.  6800;  Pullan  v.  Kin- 
singer,  2  Abb.  (U.  S.)  94,  Fed.  Cas.  11463. 


14  FEDERAL   INCOME   TAX   LAW 

tional  so  far  as  applied  to  statutes  for  penalties  or  for- 
feitures.^ 

It  has  also  been  suggested  that  the  statutes  (Rev. 
Stat.,  §§  3173,  3175)  granting  to  collectors  power  of 
entry  and  examination,  and  punishing  disobedience  of 
their  summons,  as  a  contempt,  would  be  unconstitutional, 
if  construed  to  make  the  exercise  of  such  power  depend- 
ent solely  upon  the  arbitrary  discretion  of  a  collector, 
and  regardless  of  its  connection  with  his  proper  juris- 
diction; or  the  said  disobedience  as  pimishable  without 
prior  judicial  action. ^ 

That  the  taxation  of  corporations,  organized  under 
state  laws — either  by  way  of  franchise  tax  or  excise  for 
the  privilege  of  doing  business — is  within  the  power  of 
the  federal  government,  is  unquestioned.^ 

This  is  the  case  even  though  the  tax  imposed  upon 
a  public  service  corporation,  or  on  a  private  business 
carried  on  by  a  state  and  not  directly  connected  with  the 
exercise  of  its  sovereign  powers.^ 

Income  tax,  a  direct  tax 

The  constitutionality  of  the  several  income  tax  acts,  as 
well  as  of  acts  kindred  thereto,  has  been  constantly  at- 
tacked upon  the  ground  that  they  laid  direct  taxes  not 
based  upon  apportionment;  but  prior  to  the  consideration 
of  the  act  of  1894,  these  taxes  were  invariably  sustained  as 
being  excise  taxes — in  the  case  of  corporations,  a  payment 
for  the  privilege  of  doing  business,  as  was  the  case  with  the 
corporation  tax  act  of  1909.^ 

1  Boyd  V.  United  States,  116  U.  S.  616,  29  L.  Ed.  746. 

2  Re  Kinney,  102  Fed.  468;  Re  Becker,  22  I.  R.  R.  266,  Fed.  Cas. 
1208.  Cp.  Re  Phillips,  Fed.  Cas.  11097,  10  I.  R.  R.  107;  Ex  parte 
DoU,  11 1.  R.  R.  36,  7  Phila.  595,  Fed.  Cas.  3968. 

'  Veazie  Bank  v.  Fenno,  8  WaU.  533, 19  L.  Ed.  482;  Nicoll  v.  Ames,  173 
U.  S.  509,  43  L.  Ed.  786,  19  S.  Ct.  522;  Thomas  v.  United  States,  192 
U.  S.  363;  Flint  v.  Stone,  Tracey  &  Co.,  220  U.  S.  107,  55  L.  Ed.  389. 

*  South  Carolma  v.  United  States,  199  U.  S.  437,  50  L.  Ed.  261,  271, 
26  S.  Ct.  110;  Flint  v.  Stone,  Tracey  &  Co.,  220  U.  S.  107, 55  L.  Ed.  389. 

*  Hylton  V.  United  States,  3  Ball.  171,  1  L.  Ed.  556;  Pac.  Ins.  Co, 


CONSTITUTIONALITY  15 

If  the  reasoning  of  the  authorities  upon  this  point 
is  not  entirely  satisfactory,  it  will  be  remembered  that  the 
acts  were  passed  to  meet  the  necessities  occasioned  by  the 
Civil  War,  and  were  inevitably  construed  with  this  in 
mind. 

Upon  a  consideration  of  the  same  question  in  connection 
with  the  Act  of  1894,  the  Supreme  Court  practically 
reversed  the  earlier  decisions,  holding  the  act  unconstitu- 
tional as  laying  a  direct  tax.^ 

Direct  tax — Constitutional  amendment 

The  point  is  now  settled  by  the  constitutional  amend- 
ment granting  power  to  Congress  'Ho  lay  and  collect 
taxes  on  incomes  from  whatever  source  derived,  and 
without  apportionment  among  the  several  states,  and 
without  regard  to  any  census  or  enumeration.  "^ 

Retroactive  and  alien  taxation 

There  are  two  questions  that  have  occasionally  arisen 
in  the  administration  pf  income  tax  laws  which  cannot  be 
considered  as  entirely  settled.  These  are  whether  tax  acts 
(a)  having  a  retroactive  effect,  or  (b)  taxing  the  income 
of  non-resident  aliens  are  constitutional. 

(a)  Ex  post  facto  statutes 

The  class  of  statutes  prohibited,  as  ex  post  facto,  does 
not  necessarily  include  all  retroactive  laws:  it  includes 
those  laws  which 

1.  J\Iake  criminal,  actions  committed  before  the  enact- 
ment and  which  were  innocent  when  committed. 

2.  Make  a  crime  greater  than  when  committed. 

V.  Soule,  7  Wall.  433,  19  L.  Ed.  95;  Springer  v.  United  States,  102  U.  S. 
586,  26  L.  Ed.  253;  Memphis  R.  R.  Co.  v.  United  States,  108  U.  S.  234, 
27  L.  Ed.  713. 

1  Pollock  V.  Farmers'  L.  &  T.  Co.,  158  U.  S.  601,  39  L.  Ed.  1108, 
15  S.  Ct.  912. 

2  U.  S.  Cons.,  XVI  Amdt.,  36  Stat.  Pt.  I. 


16  FEDERAL   INCOME   TAX   LAW 

3.  Inflict  a  greater  punishment  than  that  imposable  for 
a  crime  when  committed. 

4.  Require  less  or  different  testimony  for  conviction 
of  an  offence  than  that  required  at  the  time  of  its  com- 
mission.^ 

In  general,  therefore,  it  has  been  held  that  the  ex  post 
facto  prohibition  applies  only  to  statutes  respecting  crimes 
and  punishments. 2 

Although  the  decisions  upon  this  subject  will  be  found 
generally  to  deal  with  criminal  cases,  the  prohibition  has 
frequently  been  declared  to  extend  to  laws  of  a  penal 
nature; '  thus,  acts  rescinding  a  state  grant  of  real  property 
because  of  fraud  in  its  inception;*  or  increasing  the 
penalty  for  a  failure  to  comply  with  the  specifications  of 
the  Railroad  Law  as  to  locomotive  bells;  or  providing 
for  an  award  of  punitive  damages  in  certain  cases,  ^  were 
held  unconstitutional.^ 

It  has  also  been  generally  stated  that  statutes  imposing 
penalties  and  forfeitures  cannot  be  extended  by  construc- 
tion without  virtually  enacting  ex  post  facto  laws  by 
judicial  legislation.^ 

1  Calder  v.  Bidl,  3  Ball.  389,  1  L.  Ed.  650. 

2  Carpenter  v.  Pennsylvania,  17  How.  (U.  S.)  462,  15  L.  Ed.  128; 
Satterlee  v.  Matthewson,  2  Pet.  415,  7  L.  Ed.  470;  Willoughby,  Cons. 
Law,  802;  Lock  v.  Dane,  9  Mass.  360;  Southwick  v.  Southwick,  49 
N.  Y.  510;  Hartung  v.  People,  22  N.  Y.  95;  Ratzky  v.  People,  29  N.  Y. 
124. 

»Kring  v.  Missouri,  107  U.  S.  221,  2  S.  Ct.  443,  27  L.  Ed.  506; 
Hawker  v.  N.  Y.,  170  U.  S.  189,  18  S.  Ct.  573,  42  L.  Ed.  1002;  Mallctt 
V.  N.  C,  181  U.  S.  589,  21  S.  Ct.  730,  45  L.  Ed.  1015;  Thompson  v. 
Utah,  170  U.  S.  343,  18  S.  Ct.  630,  42  L.  Ed.  1061;  Watson  v.  Mercer, 
8  Pet.  109,  8  L.  Ed.  883;  League  v.  Texas,  184  U.  S.  161.  22  S.  Ct.  475, 
46  L.  Ed.  480;  Re  Sawyer,  124  U.  S.  200,  8  S.  Ct.  482,  31  L.  Ed.  402; 
Gotcheus  V.  Matheson,  61  N.  Y.  101;  Re  Medley,  134  U.  S.  160,  10 
S.  Ct.  483,  33  L.  Ed.  835. 

*  Fletcher  v.  Peck,  6  Cranch,  137,  3  L.  Ed.  178. 
«  O'Donoghue  v.  Akin,  63  Ky.  478 

•  Wilson  V.  Ohio  &  M.  Ry.  Co.,  64  lU.  542. 
->  Curtis  V.  Leavitt,  17  Barb.  309. 


CONSTITUTIONALITY  17 

It  is  not  essential,  in  order  to  render  a  statute  invalid 
as  ex  post  facto,  that  the  action  to  which  it  relates  should 
be  assumed  to  be  criminal,  or  the  punishment  provided 
on  that  ground.  The  prohibition  will  apply  to  any  law 
subjecting  an  individual  to  a  pecuniary  penalty  for  an 
act  which  when  done,  involved  no  responsibility,  or  de- 
priving a  party  of  any  valuable  right,  such  as  the  right 
to  follow  a  lawful  calling,  because  of  acts  which  were  in- 
nocent, or  at  least  not  punishable  by  law,  when  com- 
mitted. ^ 

Although  in  terms  thus  restricted  to  criminal  and  penal 
laws,  there  is  one  early  decision  of  the  Supreme  Court, 
which  may  well  be  considered  in  connection  with  this 
subject,  indicating  that,  where  necessary  to  prevent 
manifest  injustice,  the  ex  post  facto  doctrine  might  even  be 
extended  to  cases  arising  under  statutes  of  other  nature.  ^ 

There  is  no  question  that  while  a  retroactive  operation 
will  not  be  given  by  construction,  so  as  to  subject  persons 
to  a  tax  upon  interests  which  they  may  have  acquired  long 
prior  to  the  enactment;  ^  or,  after  annual  tax  settlements, 
to  authorize  inquiries  by  the  taxing  officer  extending  back 
for  a  number  of  years,  ^  an  act  is  not  void  from  the  mere 
fact  that  it  may  divest  antecedent  rights  of  property.^ 

The  principle,  originally  laid  down  by  the  Supreme 
Court,  that  tax  acts  having  a  retrospective  operation, 
are  not,  upon  that  ground,  to  be  classed  as  ex  post  facto 
and  unconstitutional,  has  been  uniformly  held  unques- 
tionable.^ 

This  was  maintained  even  where  such  act  resulted  in 

1  Cooley  on  Cons.  Lim.  (1903)  375. 

2  Ogden  V.  Saunders,  25  U.  S.  285,  6  L.  Ed.  630. 
■  Folsom  V.  United  States,  21  Fed.  37. 

*  Sturges  V.  Carter,  114  U.  S.  511,  5  S.  Ct.  1014,  21  L.  Ed.  240. 

6  Watson  V.  Mercer,  8  Pet.  110,  8  L.  Ed.  884;  League  v.  Texas,  184 
U.  S.  161,  46  L.  Ed.  478;  People  ex  rel.  Collins  v.  Spicer,  99  N.  Y.  225. 

«  Locke  V.  New  Orleans,  4  Wall.  172,  18  L.  Ed.  334;  Exchange  Bank 
Tax  Cases,  21  Fed.  91;  Orr  v.  Oilman,  183  U.  S.  278,  22  S.  Ct.  213,  46 
L.  Ed.  196;  Cooley,  Taxation,  3d  Ed.  492, 


18  FEDERAL  INCOME   TAX   LAW 

the  practical  imposition  of  a  penalty  because  of  the  dis- 
tribution of  dividends  prior  to  the  enactment.^  The 
character  of  the  statute  under  consideration  in  this  case 
should,  however,  be  carefully  noted. 

Apparent  qualifications  of  this  principle  will  be  generally 
found  dependent  upon  the  reading  of  particular  statutes.  ^ 

Further,  acts  passed  after  a  tax  ha-s  fallen  due,  providing 
the  method  of  collection  thereof,^  or  requiring  payment 
of  interest  from  the  due  date;  ^  and  acts  authorizing  addi- 
tions to  be  made  to  taxable  property  omitted  by  the  owner 
in  previous  years,  are  constitutional.^ 

Questions  as  to  present  act 

The  substantial  questions  which  may  arise  as  to  the 
ex  post  facto  nature  of  provisions  of  the  present  act  will, 
accordingly,  be  chiefly  as  to  the  vaUdity  of  provisions  im- 
posing penalties;  conferring  upon  public  officials  rights 
of  entry  or  examination;  and  compelling  the  production 
of  individual  books  and  papers. 

The  decision  of  the  Supreme  Court  most  frequently 
cited  in  this  connection  ^  actually  turned  upon  the  fact 
that  the  commission  of  the  act  attempted  to  be  penalized 
was  at  ,an  hour  of  the  day  prior  to  the  passage  of  the  stat- 
ute, and  not,  therefore,  subject  to  the  provisions  thereof. 

Directly  in  point,  however,  are  the  following  decisions : 

(a)  An  act  providing  that  refusal  to  make  an  affidavit 
as  to  business  done  during  a  period  beginning  before  the 
date  of  the  enactment,  should  be  deemed  a  misdemeanor, 
punishable  by  fine  or  imprisonment,  is  constitutional :  ^ 

1  Stockdale  v.  Insurance  Co.,  20  Wall.  323,  22  L.  Ed.  348. 

=>  Western  Union  R.  R.  Co.  v.  United  States,  101  U.  S.  543,  25  L.  Ed. 
1068;  United  States  v.  Indianapolis  R.  R.  Co.,  113  U.  S.  711,  28  L.  Ed. 
1140. 

»  People  V.  Seymour,  16  Cal.  332;  League  v.  Texas,  184  U.  S.  156,  22 
S.  Ct.  475,  46  L.  Ed.  478. 

*  League  v.  Texas,  184  U.  S.  156,  46  L.  Ed.  478. 

*  Gager  v.  Prout,  48  Ohio  St.  89,  26  N.  E.  1013. 

*  Burgess  v.  Salmon,  97  U.  S.  381,  97  L.  Ed.  1104. 
'  State  p.  Bell,  61  N.  C.  76. 


CONSTITUTIONALITY  19 

(6)  In  a  proceeding  begun  before  the  enactment  of  a 
statute  authorizing  the  court,  in  any  civil  suit  arising 
under  the  revenue  laws,  to  require  a  defendant  to  produce 
any  books  and  papers  tending  to  prove  the  government's 
allegations  or  take  such  allegations  as  confessed,  an  order 
directing  such  production,  if  expressly  limited  to  books  and 
papers  referring  to  business  done  subsequent  to  the  date  of 
enactment,  would  be  valid. ^  (This  decision  suggests  that 
in  an  action,  begun  subsequent  to  the  date  of  the  enact- 
ment, an  order  directing  the  production  of  books  relating 
to  business  done  prior  thereto,  would  have  been  held 
illegal,  as  ex  post  facto.  This  is  emphasized  by  the  fol- 
lowing decision): 

(c)  An  act  authorizing  the  court  to  require  such  produc- 
tion is  ex  post  facto  as  to  any  proceeding  begun  before  the 
date  of  the  enactment,  where  the  order  is  not  so  limited :  ^ 

(d)  Acts  providing  for  the  imposition  of  penalties  for 
defaults  committed  in  years  prior  to  the  date  of  enactment, 
are  ex  post  facto  and  unconstitutional:  ^ 

(e)  A  statute  which  is  ex  post  facto  as  to  certain  ofifenses 
is  not,  therefore,  wholly  void,  but  may  be  valid  as  to  such 
offenses  as  are  committed  after  the  date  of  the  enactment.^ 

A  further,  and  important  question  may  arise  as  to  the 
constitutionality  of  the  present  statute  in  so  far  as  it  may 
be  applicable  to  any  income  earned  or  accrued  before  the 
passage  of  the  constitutional  amendment,  because  prior 
thereto  no  power  rested  in  Congress  to  levy  a  tax  upon 
incomes  except  by  apportionment. 

The  act  imposes  the  tax  upon  individual  net  income 
accruing  from  March  1st  to  December  31  st,  1913.  If 
by  "accruing"  is  meant  received  or  becoming  payable, 

1  United  States  v.  Distillery  No.  28,  6  Biss.  493,  Fed.  Cas.  14966. 

2  United  States  v.  Hughes,  8  Benedict,  29,  Fed.  Cas.  15416;  United 
States  V.  Distillery  No.  28,  6  Biss.  493,  Fed.  Cas.  14966. 

» Gager  v.  Prout,  48  Ohio  St.  89,  26  N.  E.  1013;  Metz  v.  Hagerty, 
51  0.  St.  521,  38  N.  E.  11;  Ryan  v.  State,  5  Neb.  276. 
*  Jaehne  v.  New  York,  128  U.  S.  189,  9  S.  Ct.  70,  32  L.  Ed.  39§. 


20  FEDERAL   INCOME   TAX   LAW 

it  may  be  questioned  whether  the  provision  is  constitu- 
tional as  to  the  taxation  of  any  income  so  received,  but 
which  may  have  been  earned  prior  to  the  amendment. 

The  act  imposes  the  tax  upon  corporate  net  income 
accrued  within  that  portion  of  1913  from  March  1st  to 
December  31st,  both  dates  inclusive.  As  "accrued" 
may  be  assumed  to  be  intended  to  have  the  same  meaning 
as  "accruing"  in  the  case  of  individual  income,  the  same 
objection  will  apply  to  this  provision. 

A  second  objection  may  also  be  made  upon  the  ground 
that  the  corporate  net  income  for  the  specified  portion 
of  said  year  is  to  be  taken  as  five-sixths  of  the  entire  net 
income  for  the  calendar  year,  which  may  be  entirely 
contrary  to  fact,  and  objectionable  not  only  as  including 
income  actually  earned  prior  to  the  constitutional  amend- 
ment, but  also  as  based  upon  a  physical  untruth. 

The  further  objection,  sometimes  urged,  that  no  retro- 
active income  tax  act  can  be  constitutionally  passed,  be- 
cause income  received  prior  to  the  enactment  of  the  statute 
has  become  principal,  and  no  longer  exists  as  income  for 
any  purpose,  is  probably  untenable  for  reasons  discussed 
above  (p.  15). 

In  this  general  connection,  see  "Construction  of  Par- 
ticular Acts,"  (p.  30). 

Taxation  of  aliens 

The  right  of  any  sovereignty  to  tax  aliens  resident 
within  its  territory,  upon  property  therein  located,  has 
never  been  doubted. 

As  to  the  right  to  tax  non-resident  aliens  upon  such  prop- 
erty, the  question  does  not  appear  to  have  been  directly 
and  satisfactorily  settled,  at  least  in  the  United  States. 

The  Supreme  Court  has  consistently  held  that  the  con- 
stitution is  the  only  limitation  upon  the  power  of  Congress 
in  this  respect  of  which  the  judicial  branch  of  the  govern- 
ment will  take  notice.^ 

1  Mich.  Cen.  R.  R.  Co.  v.  Slack,  100  U.  S.  595,  25  L.  Ed.  647. 


CONSTITUTIONALITY  21 

The  question  as  to  whether  this  power  could  be  consti- 
tutionally exercised,  was  raised  at  an  early  date  (1868),^ 
but  not  decided,  in  view  of  the  court's  conclusion  that  the 
Act  of  1864  did  not  apply  to  non-resident  aliens.  The 
opinion  there  expressed,  that  a  somewhat  similar  state 
statute,  under  examination  in  the  same  case,  imposed  a 
tax  upon  the  property  of  the  alien,  must  be  cautiously 
accepted  as  here  in  point,  because  of  the  peculiar  wording 
of  that  statute. 

The  act  having  been  made  to  include  non-resident 
aliens  by  legislative  declaration,^  and  amendment,^  the 
question  as  to  the  incidence  of  the  tax  was,  in  1872, 
incidentally  but  carefully  considered,^  but  can  scarcely  be 
said  to  have  been  satisfactorily  determined. 

Although  in  the  majority  opinion  it  was  stated  that  the 
tax  was  imposed  upon  the  corporation,  and  not  upon  the 
creditor  or  stockholder,  one  member  of  the  court  con- 
curred upon  another  ground,  and  from  the  opinion  four 
members  dissented,  holding  the  corporation  to  be  merely 
a  collector  for  the  Government. 

Moreover,  in  the  next  reported  case,^  decided  about 
a  month  later,  the  court  expressly  adopted  the  doctrine 
of  the  earlier  cases,^  declaring  these  to  have  been  a  clear, 
distinct,  and  unqualified  adjudication  that  the  tax  im- 
posed by  the  Act  of  1864  was  upon  the  creditor  or  stock- 
holder, and  not  upon  the  corporation,  the  latter  being 
merely  used  as  a  convenient  and  effective  instrument  for 
collection.^ 

1  R.  R.  Co.  V.  Jackson,  7  Wall.  263,  19  L.  Ed.  88. 

2  Laws  1866,  Chap.  XV,  14  Stat.  4. 

3  Laws  1866,  Chap.  CLXXXIV,  14  Stat.  98. 

*  Barnes  v.  B.  &  0.  R.  R.,  17  Wall.  294,  21  L.  Ed.  544. 

s  United  States  v.  R.  R.  Co.,  17  Wall.  322,  21  L.  Ed.  597. 

«  Haight  V.  R.  R.  Co.,  6  Wall.  17, 18  L.  Ed.  819;  R.  R.  Co.  v.  Jackson, 
7  Wall.  262,  19  L.  Ed.  88. 

7  United  States  v.  B.  &  O.  R.  R.  Co.,  17  Wall.  322,  21  L.  Ed. 
597. 


22  FEDERAL  INCOME  TAX  LAW 

In  1873,  this  doctrine  was  reiterated  in  both  prevailing 
and  dissenting  opinions.^ 

In  1879,  the  court  reversed  its  ruling  in  all  of  the  earlier 
cases,  holding  that  the  tax  imposed  under  the  Act  of  1864, 
as  thus  amended,  was  essentially  an  excise  on  the  business 
of  the  corporation,  2  and,  therefore,  again  declined  to  pass 
upon  the  direct  question  as  to  taxation  of  a  non-resident 
alien.  It  is  curious  that  this  was  done  without  comment  or 
dissenting  opinion,  the  probable  explanation  being  found 
in  the  court's  statement  that  the  tax  involved  was  small, 
the  law  under  which  it  was  collected  long  since  repealed, 
and  the  case,  therefore,  of  little  consequence,  as  re- 
gards any  principle  involved  in  it,  as  a  rule  of  future 
action. 

In  1882,  by  a  divided  court,  this  case  was  held  as  an 
authority  for  a  decision  imposing  upon  a  corporation  pay- 
ment of  taxes  which  it  had  failed  to  deduct  from  dividends 
paid  to  such  aliens.^ 

A  vigorous  and  convincing  dissenting  opinion  was 
rendered  by  Field,  J.,  however,  to  the  effect  that  no 
language  or  argument  could  conceal  the  fact  that  this  tax 
was  upon  the  property  of  the  stockholder  or  creditor;  that 
the  situs  of  such  property  was  that  of  its  owner;  and  that 
it  was,  accordingly,  an  absurdity  to  suppose  that  Congress 
had  power  to  tax  such  income  when  payable  to  a  non- 
resident.^ 

In  a  separate  opinion,  Bradley  and  Harlan,  JJ.,  while 
declaring  the  tax  to  be  one  upon  neither  the  corporation, 
nor  the  stockholder  and  creditor,  but  upon  the  income, 
itself,  expressly  sustained  its  validity,  upon  the  theory 
that  Congress  has  the  right  to  tax  all  property  physically 
within  the  territory  of  the  United  States.^ 

»  Stockdale  v.  Insurance  Cos.,  20  Wall.  323,  22  L.  Ed.  348. 
«  Mich.  Cen.  R.  R.  Co.  v.  Slack,  100  U.  S.  595,  25  L.  Ed.  647. 
'  United  States  v.  Erie  Ry.  Co.,  106  U.  S.  327,  27  L.  Ed.  151. 
*  United  States  v.  Erie  Ry.  Co.,  106  U.  S.  330,  27  L.  Ed.  153. 
'  United  States  v.  Erie  Ry.  Co.,  106  U.  S.  703,  27  L.  Ed.  151. 


CONSTITUTIONALITY  23 

The  reasoning  of  the  court  in  a  more  recent  case  with 
regard  to  a  succession  tax  ^  would  probably  be  held  applica- 
ble to  this  question- 

1  Eidman  v.  Martinez,  184  U.  S.  578,  22  S.  Ct.  515,  46  L.  Ed. 
697. 


CHAPTER  III 

CONSTRUCTION 

General  rules 

The  basic  principle  of  construction  is  to  ascertain  and 
give  effect  to  the  legislative  intent.^ 

This  object  is  to  be  attained  though  it  necessitate  giving 
to  general  language  a  limited  construction;  ^  or  extending 
the  ordinary  meaning  of  precise  words;  ^  or  adopting  a 
construction  of  the  statute  contrary  to  its  terms.  ^ 

This  intent  is  to  be  found  in  the  language  of  the  statute,^ 
in  the  interpretation  of  which,  words  of  common  usage 
should  be  accorded  their  ordinary  meaning.  ^ 

Where,  however,  words  used  in  a  statute  have  already 
acquired  an  accepted  meaning,  they  will  be  presumed  to 
be  used  in  that  sense.'' 

» United  States  v.  Crosley,  196  U.  S.  327,  25  S.  Ct.  261,  49  L.  Ed. 
497. 

2  McKee  v.  United  States,  164  U.  S.  287,  17  S.  Ct.  92,  41  L.  Ed.  437; 
Brewer  v.  Blougher,  14  Pet.  178,  10  L.  Ed.  408;  Reiche  v.  Smythe,  13 
Wall.  162,  20  L.  Ed.  566;  United  States  v.  Trans-Missouri  Freight 
Assn.,  166  U.  S.  290,  41  L.  Ed.  1007. 

=>  United  States  v.  Freeman,  3  How.  (U.  S.)  556,  11  L.  Ed.  724. 

*  Treat  v.  White,  181  U.  S.  267,  21  S.  Ct.  611,  45  L.  Ed.  853;  United 
States  V.  Buchanan,  9  Fed.  689;  Holy  Trin.  Church  v.  United  States, 
143  U.  S.  457,  12  S.  Ct.  511,  36  L.  Ed.  227;  Smythe  v.  Fiske,  23  Wall. 
374,  23  L.  Ed.  47. 

5  United  States  v.  Goldenberg,  168  U.  S.  95,  18  S.  Ct.  3,  42  L.  Ed. 
394;  Pennington  v.  Coxe,  2  Cranch,  33,  6  L.  Ed.  199. 

6  United  States  v.  Temple,  105  U.  S.  97,  17  S.  Ct.  436,  26  L.  Ed. 
967;  United  States  v.  Isham,  17  Wall.  496,  21  L.  Ed.  728;  United  States 
V.  Buchanan,  9  Fed.  689;  Equit.  Tr.  Co.  v.  Seldon,  8  Fed.  Cas.  4508; 
Schriefer  v.  Wood,  5  Blatch.  215,  Fed.  Cas.  12481;  Maillard  v.  Law- 
rence, 16  How.  (U.  S.)  251,  14  L.  Ed.  925. 

'  United  States  v.  Mooney,  116  U.  S.  106,  6  S.  Ct.  304,  24  L.  Ed.  551. 
24 


CONSTRUCTION  26 

The  whole  statute  should  be  construed  in  determining 
the  meaning  of  any  of  its  parts,  ^  and  efifect  should  be  given 
to  every  word  and  clause  of  the  statute,  in  case  of  a  con- 
flict, the  act  being  so  construed,  if  possible,  as  to  render 
every  word  operative.  ^ 

General  expressions  will  not  be  considered  so  restrained 
by  particular  words  as  to  render  useless  a  distinct  reference 
to  an  entire  clause.^ 

Part  of  an  act  cannot  be  disregarded  unless  so  clearly 
repugnant  to  the  residue  that  the  whole  cannot  stand 
together.^ 

Nor  can  a  provision,  omitted  purposely  or  by  error,  be 
supplied.^ 

If  there  be  ambiguity  in  any  particular,  such  construc- 
tion should  be  adopted  as  to  harmonize  the  act  with 
the  general  legislative  purpose  and  spirit.^ 

As  Congress  is  bound  to  express  its  intention  to  impose 
a  tax  in  clear  and  unambiguous  language,  words  of  ex- 
ception limiting  its  imposition  should  be  liberally  con- 
strued.^ 

Statutes  should  be  construed  to  apply  only  to  the 

1  Georgia  v.  Atkins,  1  Abb.  (U.  S.)  22,  Fed.  Gas.  5350;  Pennington 
V.  Goxe,  2  Cranch,  33,  2  L.  Ed.  199. 

2  Chicago,  etc.,  R.  R.  Go.  v.  United  States,  127  U.  S.  406,  8  S.  Gt. 
1194,  32  L.  Ed.  180;  Montclair  v.  Ramsdell,  107  U.  S.  147,  2  S.  Gt.  391, 
27  L.  Ed.  431;  Bemier  v.  Bemier,  147  U.  S.  242,  13  S.  Gt.  244,  37  L. 
Ed.  152;  Wilmot  v.  Mudge,  103  U.  S.  217,  23  L.  Ed.  536. 

3  Adams  v.  Woods,  2  Granch,  336,  2  L.  Ed.  297. 

*  Rice  V.  Minn.,  etc.,  R.  R.  Go.,  1  Black,  358,  17  L.  Ed.  147. 

5  Hobbs  V.  McLean,  117  U.  S.  567,  29  L.  Ed.  940. 

sGardinel  v.  Smith,  Deady,  197,  Fed.  Gas.  2395;  United  States  v. 
Smock,  4  I.  R.  R.  202;  Warren  v.  United  States,  58  Fed.  559,  also  4 
Gt.  Gl.  526;  Bernier  v.  Bernier,  147  U.  S.  242,  13  S.  Gt.  244,  37  L.  Ed. 
152;  Petri  v.  Gommercial  Bank,  142  U.  S.  644,  35  L.  Ed.  1144;  Durons- 
seau  V.  United  States,  6  Granch,  307,  3  L.  Ed.  232. 

7  Eidman  v.  Martinez,  184  U.  S.  578,  46  L.  Ed.  697;  Denn  v.  Dia- 
mond, 10  E.  G.  L.  320;  Doe  v.  Snaith,  21  E.  G.  L.  253;  Wroughton  v. 
Turtle,  11  M.  &  W.  560;  Williams  v.  Sangar,  10  East,  66;  Warrington 
».  Furbor,  8  East,  242. 


26  FEDERAL  INCOME  TAX  LAW 

future,  unless  they  clearly  and  explicitly  cover  past  trans- 
actions.^ 

Construction  will  not  favor  fanciful  or  unsubstantial 
distinctions:  ^  all  general  terms  should  be  so  limited  in 
application  as  to  prevent  injustice,  oppression,  or  uncon- 
stitutional operation:  ^  and  resort  must  be  had  to  every 
reasonable  construction  to  save  a  statute  from  uncon- 
stitutionality.^ 

Internal  evidence  of  legislative  intent 

Where  the  words  of  statute  are  not  explicit,  the  legis- 
lative intent  may  be  ascertained  from  the  context  and 
general  purpose  of  law,^  and  reference  may  be  had  to 
the  title  of  an  act,  in  cases  of  doubt  or  ambiguity.® 

External  evidence  of  legislative  intent 

In  cases  of  doubtful  meaning,  all  statutes  in  pari 
materia,  whether  repealed  or  not,  should  be  considered:  ^ 
And  resort  may  also  be  had  to  the  journals  of  Congress.^ 
Although  construction  of  the  law  is  the  duty  of  the 
judiciary,  departmental  decisions  may  be  considered  in^ 
case  of  doubt.^  Such  decisions  will  usually  be  given 
weight;  ^^  and  will  be  followed  unless  there  are  cogent 

1  Stockdale  v.  Ins.  Co.,  20  WaU.  323,  22  L.  Ed.  348;  Re  Brown,  3 
I.  R.  R.  134,  Fed.  Cas.  1977. 

» United  States  v.  Kallstrom,  30  Fed.  184. 

»  Carlisle  v.  United  States,  16  Wall.  147, 8  Ct.  CI.  153, 21  L.  Ed.  426; 
United  States  v.  Kirby,  7  Wall.  482,  9  L.  Ed.  278. 

*  Knights  Templar,  etc.,  Co.  v.  Jarman,  187  U.  S.  197,  23  S.  Ct.  108, 
47  L.  Ed.  139. 

5  Saunders  v.  Howard,  Fed.  Cas.  12375;  United  States  v.  Freeman, 
3  How.  (U.  S.)  556, 11  L.  Ed.  724. 

•  United  States  v.  0.  &  C.  Ry.  Co.,  164  U.  S.  526,  17  S.  Ct.  165,  41 
L.  Ed.  541;  Knowlton  v.  Moore,  178  U.  S.  41,  20  S.  Ct.  747,  44  L.  Ed. 
969. 

^  17  Op.  Atty.  Gen.  646;  New  Lamp  Chimney  Co.  v.  Ansonia,  etc., 
Co.,  91  U.  S.  656,  23  L.  Ed.  336. 

8  Blake  v.  Natl.  Bank,  23  Wall.  307,  23  L.  Ed.  119. 

9  Dunlap  V.  United  States,  173  U.  S.  65, 43  L.  Ed.  619, 33  Ct.  CI.  135. 
i»  Smythe  v.  Fiske,  23  Wall.  382,  23  L.  Ed.  49. 


CONSTRUCTION  27 

reasons  to  the  contrary.^  The  courts  will  not,  however, 
feel  bound  to  follow  such  decisions  except  in  cases  of 
doubt  and  where  the  construction  adopted  therein  has 
been  long  accepted. ^ 

Rules  specifically  applicable  to  tax  acts 

Congress  is  bound  to  express  its  intention  to  tax  in 
clear  and  unambiguous  language.  If  the  language  is 
clear,  there  is  no  room  for  presumption  and  what  Congress 
intended  is  immaterial.^ 

Words  of  exemption  should  be  liberally  construed.'* 

Before  property  can  be  taken  under  the  taxing  power, 
it  is  necessary  that  the  statute  be  clear  and  unambig- 
uous.^ 

The  courts  are  not  at  liberty  by  construction  or  legal 
decision  to  enlarge  the  scope  of  an  act  to  include  subjects 
of  taxation  not  within  its  terms.^ 

Revenue  statutes,  being  neither  remedial,  nor  founded 

1  United  States  v.  Moore,  95  U.  S.  760,  24  L.  Ed.  588;  United  States 
V.  Finnell,  185  U.  S.  236,  22  S.  Ct.  633,  46  L.  Ed.  890;  Pennoyer  v. 
McConnaughty,  140  U.  S.  1,  35  L.  Ed.  363;  Schell  v.  Fauche,  138 U.  S. 
562,  34  L.  Ed.  1040;  United  States  v.  Johnston,  124  U.  S.  236,  8  S.  Ct. 
446,  31  L.  Ed.  389;  United  States  v.  Hill,  120  U.  S.  169,  7  S.  Ct.  510, 
30  L.  Ed.  627;  Brown  v.  United  States,  113  U.  S.  568,  28  L.  Ed.  1097; 
Peabody  v.  Stark,  16  Wall.  240,  21  L.  Ed.  311;  United  States  v.  Natl. 
Surety  Co.,  122  Fed.  904,  59  C.  C.  A.  130;  United  States  v.  Tanner, 
147  U.  S.  661,  13  S.  Ct.  436,  37  L.  Ed.  321;  Robertson  v.  Downing, 
127  U.  S.  607,  8  S.  Ct.  1328,  32  L.  Ed.  269;  Hahn  v.  United  States,  107 
U.  S.  402,  2  S.  Ct.  494,  27  L.  Ed.  527;  St.  Paul,  etc.,  Ry.  Co.  v.  Phelps, 
137  U.  S.  528,  11  S.  Ct.  168,  34  L.  Ed.  767. 

2  Swift  V.  United  States,  105  U.  S.  691,  26  L.  Ed.  1108;  Fairbank  v. 
United  States,  181  U.  S.  283, 45  L.  Ed.  863. 

=>  N.  Y.  Tel.  Co.  V.  Treat,  130  Fed.  340;  Eidman  v.  Martinez,  184 
U.  S.  578,  46  L.  Ed.  697. 

*  Eidman  v.  Martinez,  184  U.  S.  578,  46  L.  Ed.  697. 

s  Pa.  Life  Ins.  Co.  v.  McClain,  105  Fed.  367;  Phila.,  etc.,  R.  R.  Co.  v. 
Kenney,  Fed.  Cas.  1188,  18  I.  R.  R.  92. 

•  United  States  v.  Watts,  1  Bond,  580,  Fed.  Cas.  16653;  United  States 
V.  Kenton,  2  Bond,  97,  Fed.  Cas.  15526. 


28  FEDERAL   INCOME   TAX   LAW 

upon  permanent  public  policy,  are  construed  in  favor  of 
the  taxpayer  and  against  the  government.^ 

They  are,  however,  to  be  construed  liberally  so  far  as 
may  be  necessary  to  carry  out  the  purposes  of  their  enact- 
ment.^ 

They  should  be  construed  with  reasonable  fairness  to 
the  citizen.^ 

Where  a  tax  act  is  of  doubtful  construction,  the  doubt 
is  to  be  construed  in  favor  of  the  taxpayer  under  both  the 
English  and  xAmerican  rules.'* 

On  the  other  hand,  it  has  been  held  that  an  exemption 
from  taxation  will  never  be  presumed,  but  must  be  clearly 
granted;  ^  that  a  statute  granting  such  exemption  should 
be  strictly  construed;^  and  that  where  execptions  are 

1  Amer.  Net  &  Twine  Co.  v.  Worthington,  141  U.  S.  468,  35  L.  Ed. 
821;  Rice  v.  United  States,  53  Fed.  910,  4  C.  C.  A.  104;  Mut.  Ben. 
Life  Ins.  Co.  v.  Herold,  198  Fed.  199. 

2  Smythe  v.  Fiske,  23  Wall.  374,  23  L.  Ed.  47;  United  States  v. 
Stowell,  133  U.  S.  1,  10  S.  Ct.  244,  33  L.  Ed.  555;  Cliquot  v.  United 
States,  3  Wall.  114,  18  L.  Ed.  116;  United  States  v.  28  Cases  of  Wine, 
2  Ben.  63,  Fed.  Cas.  14281;  United  States  v.  Hodson,  Fed.  Cas.  15376, 
14  I.  R.  R.  100;  United  States  v.  36  Bbls.  High  Wines,  7  Blatch.  469, 
Fed.  Cas.  16468;  United  States  v.  Cole,  134  Fed.  697. 

» United  States  v.  1412  Gals.  Dist.  Spirits,  10  Blatch.  428,  Fed. 
Cas.  15960,  22  Cyc.  1604;  DeBary  v.  Souer,  101  Fed.  425,  4  C.  C.  A. 
417. 

*A.,  N.  and  T.  Co.  v.  Worthmgton,  141  U.  S.  468,  35  L.  Ed. 
821;  United  States  v.  Isham,  17  Wall.  496,  21  L.  Ed.  728;  Wright  v. 
Mich.  Cen.  R.  R.  Co.,  130  Fed.  843,  65  C.  C.  A.  327;  McNally  v.  Field, 
119  Fed.  445;  United  States  v.  MuUins,  119  Fed.  334,  56  C.  C.  A.  238; 
Eq.  Trast  Co.  v.  Seldon,  Fed.  Cas.  4508;  Powers  v.  Barney,  5  Blatch. 
202,  Fed.  Cas.  11361;  United  States  v.  Wigglesworth,  2  Story,  369, 
Fed.  Cas.  16690;  Tomkins  v.  Ashley,  5  L.  J.  K.  B.  246;  Chandos  v. 
Inland  R.  Comrs.,  20  L.  J.  Ex.  269;  Mut.  Ben.  Life  Ins.  Co.  v.  Herold, 
198  Fed.  199. 

^  Bank  v.  Tennessee,  161  U.  S.  134,  40  L.  Ed.  645;  Southwestern 
R.  R.  Co.  V.  Wright,  116  U.  S.  231,  6  S.  Ct.  375,  29  L.  Ed.  626;  Yazoo, 
&  M.  V.  Ry.  Co.  V.  Adams,  180  U.  S.  1,  21  S.  Ct.  240,  45  L.  Ed.  395. 

«  Re  Enston,  113  N.  Y.  174;  Erie  R.  R.  Co.  v,  Pennsylvania,  21  Wall, 
492,  22  L.  Ed.  595. 


CONSTRUCTION  29 

provided  in  a  general  statute,  all  others  than  those  named 
are  excluded.^ 

A  tax  statute  for  the  protection  or  convenience,  only, 
of  a  taxpayer  and  primarily  directed  to  public  officers 
for  their  guidance  and  the  substantial  protection  of  the 
Government,  is  not  so  vital  as  to  be  regarded  as  manda- 
tory, and  acts  not  done  in  strict  conformity  thereto,  as 
void.  2 

There  is,  however,  a  difference  in  construction  of  those 
provisions  of  the  revenue  laws  which  point  out  the  sub- 
jects to  be  taxed,  etc.,  and  those  which  impose  penalties.^ 

Even  such  provisions  as  impose  penalties,  however,  are 
so  construed  as  best  to  carry  out  the  legislative  intent.^ 

Although  revenue  laws  should  not  be  so  construed  as  to 
be  odious  or  oppressive  to  the  people,^  they  will  be  con- 
strued liberally  in  favor  of  the  Government  in  case  of 
fraud.^ 

Where,  however,  the  statute  prescribes  a  particular 
procedure,  it  excludes  any  other  method,'^  so  that,  e.  g., 
the  provisions  of  Revised  Statutes,  §§  3184-5,  must  be 

1  Kendall  v.  United  States,  107  U.  S.  123,  2  S.  Ct.  277,  27  L.  Ed.  437. 

2  Erhardt  v.  Schroeder,  155  U.  S.  130,  39  L.  Ed.  96. 
'  Cooley  on  Tax.,  3d  ed.  460. 

« United  States  v.  Giller,  54  Fed.  656;  Re  Leszynsky,  16  Blatch.  9, 
Fed.  Gas.  8279;  United  States  v.  100  Bbls  of  Spts.,  2  Abb.  (U.  S.)  305, 
Fed.  Cas.  15948;  United  States  v.  1412  Gals,  of  Dist.  Spts.,  10  Blatch. 
428,  Fed.  Cas.  15960;  United  States  v.  One  Black  Horse,  129  Fed.  167; 
United  States  v.  246^  lbs  of  Tobacco,  103  Fed.  791 ;  United  States  v. 
Laescki,  29  Fed.  699;  United  States  v.  Willetts,  5  Ben.  220,  Fed.  Cas. 
16699;  Re  Strouse,  1  Sawy.  605,  Fed.  Cas.  13548;  United  States  v. 
Stowell,  133  U.  S.  1,  10  S.  Ct.  244,  33  L.  Ed.  555;  United  States  v. 
Brown,  Deady,  566,  Fed.  Cas.  14662;  United  States  v.  The  Coquitlam, 
57  Fed.  706;  Contra,  Re  Brown,  3  I.  R.  R.  134. 

6  United  States  v.  Howell,  20  Fed.  718;  Carlisle  v.  United  States,  16 
Wall.  147,  8  Ct.  CI.  153,  21  L.  Ed.  426. 

•United  States  v.  Vinson,  8  Fed.  507;  United  States  v.  Wittig,  2 
Low.  466,  Fed.  Cas.  16748. 

^  R.  &  G.  R.  Co.  V.  Reid,  13  Wall.  269, 20  L.  Ed.  570;  Smitii  v.  Stevens, 
10  Wall.  321,  19  L.  Ed.  933. 


30  FEDERAL  INCOME  TAX  LAW 

strictly  construed  and  literally  followed,  or  good  title 
will  not  be  derived  by  a  sale  thereunder.' 

Although  the  law-making  power  rests  solely  in  Congress 
and  cannot  be  delegated,  regulations  made  by  an  execu- 
tive department,  under  authority  of  Congress,  have  the 
same  force  as  if  incorporated  in  the  act,^  and  judicial 
notice  of  such  regulations  will  be  taken  by  the  courts;  ^ 
but  the  statutory  law  cannot,  even  with  the  sanction  of 
the  Secretary  of  the  Treasury,  be  altered  or  amended. "* 
The  published  construction,  by  a  Commissioner,  o^"  a 
statute,  is  not,  however,  of  such  dignity  as  to  be  re- 
adopted  by  the  re-enactment  of  such  statute.^ 

Construction  of  particular  acts; 

Act  of  1861 :— Gabn  v.  United  States,  39  Ct.  CI.  55  - 

Act  of  1862:— Boutwell  275;  12  I.  R.  R.  157. 

Act  of  1864:— Barnes  v.  R.  R.,  17  WaU.  294,  21  L. 
Ed.  544;  Manhattan  Co.  v.  Blake,  148  U.  S.  112,  37 
L.  Ed.  504,  13.  S.  Ct.  640,  2  I.  R.  R.  44,  3  I.  R.  R.  140; 
Northern  Central  Ry.  Co.  v.  Jackson,  74  U.  S.  262,  19 
L.  Ed.  88. 

Act  of  1866:— Hendy  v.  Soule,  Deady,  400,  Fed.  Cas. 
6359. 

1  United  States  v.  Allen,  14  Fed.  263. 

2  Ex  parte  Reed,  100  U.  S.  13,  25  L.  Ed.  538;  United  States  v. 
Eliason,  16  Pet.  291,  10  L.  Ed.  968;  Stotesbury  v.  United  States,  23 
Ct.  CI.  285;  Harvey  v.  United  States,  3  Ct.  CI.  38;  United  States  v. 
Barrows,  1  Abb.  (U.  S.)  351,  Fed.  Cas.  14529;  Meads  v.  United  States, 
81  Fed.  684,  26  C.  C.  A.  229. 

3  Peters  v.  United  States,  33  Pac.  1031;  Caha  v.  United  States,  152 
U.  S.  211,  14  S.  Ct.  513,  38  L.  Ed.  415;  Sprinkle  v.  United  States,  141 
Fed.  811,  73  C.  C.  A.  285;  United  States  v.  Zemel,  137  Fed.  989;  Hast- 
ings V.  Herold,  184  Fed.  759. 

*  Thatcher  v.  United  States,  15  Blatch.  15,  Fed.  Cas.  13851;  Camp- 
beU  V.  United  States,  107  U.  S.  407,  2  S.  Ct.  579,  27  L.  Ed.  592;  Pascal 
t.  Sullivan,  21  Fed.  496;  Morrill  v.  Jones,  106  U.  S.  466,  1  S.  Ct.  423, 
27  L.  Ed.  267. 

'  Dollar  Sav.  Bank  t.  United  States,  19  Wall.  227,  239,  22  L.  Ed. 
80. 


CONSTRUCTION  31 

Act  of  1867:— Kensett  v.  Stivers,  18  Blatch.  397,  10 
Fed.  517;  Concord  Railway  Corporation  v.  Toplif,  Fed. 
Cas.  3093. 

Act  of  1870:— United  States  v.  Schillinger,  14  Blatch.  71, 
Fed.  Cas.  16228,  Blake  v.  Natl.  City  Bank,  23  Wall.  307, 
23  L.  Ed.  119;  Lake  Shore  &  Mich.  So.  R.  R.  Co.  v.  Rose, 
95  U.  S.  78,  24  L.  Ed.  376;  Western  Union  Railroad  Co. 
V.  United  States,  101  U.  S.  543,  25  L.  Ed.  1068. 

Act  of  1871:— 14  I.  R.  R.  33;  United  States  v.  Indian- 
apoUs  &  St.  L.  R.  R.  Co.,  113  U.  S.  711,  28  L.  Ed.  1140,  5 
S.  Ct.  716. 

Construction  of  act  of  1913: 

It  is  evident  that  without  due  additions  from  other 
sources,  the  national  revenues  will  be  so  depleted  by  the 
sweeping  reduction  of  tariff  duties  provided  by  this  Act, 
as  to  result  in  an  annual  deficit.  The  legislative  intent 
to  meet  this  deficit  through  tax  upon  incomes  is  evidenced, 
not  only  by  the  title  of  this  Act,  but  by  the  fact  that  the 
provisions  for  such  tax  are  included  in  the  Act,  itself, 
and  are  of  the  most  comprehensive  character. 

For  these  reasons,  as  well  as  in  accordance  with  the  rules 
of  construction  above  discussed,  it  may  be  safely  assumed 
that  the  Act  will  be  accorded  a  construction  of  the  utmost 
liberality  toward  the  Government. 

The  question  suggests  itself,  however,  as  to  whether, 
if  the  rule  of  strict  construction  should  be  deemed  appli- 
cable in  certain  cases,  it  might  not  necessarily  be  held, 
that  as  the  tax  is  declared  to  be  upon  income,  it  could 
only  be  a  lien  upon  the  specific  funds  constituting  such 
income,  and  in  no  case  either  a  Hen  upon,  or  collectible, 
by  distraint,  out  of  any  other  property. 

This  question  should  be  borne  in  mind  in  considering 
the  application  to  this  Act  of  the  provisions  of  the  Revised 
Statutes,  relative  to  the  lien  and  collection  of  taxest 


CHAPTER  IV 

THE  ACT,   ANNOTATED 

AN  ACT^ 

To  reduce  tariff  duties  and  to  provide  revenue  ^  for  the 
Government,  and  for  other  purposes. 

Section  II 

A.  Subdivision  1.  That  there  shall  be  levied,  assessed, 

1  An  income  tax  having  been  adjudged  to  be  a  direct  tax,  and  uncon- 
stitutional unless  apportioned  among  the  states  (Pollock  v.  Farmers 
L.  &  T.  Co.,  158  U.  S.  607,  39  L.  Ed.  1108),  the  Constitution  was 
amended  by  the  adoption  of  Article  XVI,  permitting  such  a  tax  to  be 
levied  without  apportionment.  By  virtue  of  such  authority,  Congress 
hafa  included,  as  Section  II  of  the  Tariff  Act  of  1913,  the  income  tax 
enactment.   The  remainder  of  the  Act  is  omitted,  as  not  pertinent. 

As  to  the  broad  construction  which  will  probably  be  accorded  to 
these  provisions  in  view  of  the  above  title,  the  reason  for  their  enact- 
ment, and  the  inclusion  thereof  in  the  tariff  act  as  an  integral  part 
thereof,  see  p.  31.  • 

2  General  Definitions. 

Tax. — A  rate  or  sum  of  money  assessed  on  the  property  of  a  citi- 
zen by  the  government  for  the  use  of  the  nation  or  state* 
Hamilton  v.  Dillin,  Fed.  Cas.  5979. 

Charges  imposed  by  the  legislative  power  upon  persons  or  property 
to  raise  money  for  public  purposes:  Day  v,  BuflBngton,  3 
Cliff.  376,  Fed.  Cas.  3675. 

Enforced  proportional  contribution  of  persons  and  property  levied 
by  authority  of  the  state  for  the  support  of  government  and 
for  all  public  needs:  Taylor  v.  Boyd,  63  Tex.  533-541. 

A  charge  levied  by  the  sovereign  power  upon  the  property  of  its 
subjects:  People  v.  Austin,  47  Cal.  353-361. 

The  means  by  which  a  burden  primarily  borne  by  the  state  is 
33 


THE   ACT,   ANNOTATED  33 

collected  and  paid  ^  annually  ^  upon  the  entire  net  income ' 
arising  or  accruing  from  all  sources  in  the  preceding  cal- 

transferred  to  the  citizen:  Southern  R.  Co.  v.  Kay,  62  S.  C. 
28-32,  39  S.  E.  785. 
Revenue  Laws. — Legislative  enactments  with  regard  to  internal 
revenue,  as  well  as  customs.    United  States  v.  Dustin,  Fed. 
Cas.  15012. 
As  used  in  connection  with  the  jurisdiction  of  United  States 
Courts,  laws  imposing  duties  on  imports  and  tonnage,  or  pro- 
viding in  terms  for  revenue:  laws  directly  traceable  to  the 
power  accorded  to  Congress  by  the  constitution  "to  lay  and 
collect  taxes,  duties,  imposts,  and  excises."    United  States  v. 
Hill,  123  U.  S.  681,  31  L.  Ed.  275,  8  S.  Ct.  446. 
Excises. — "Excise"  is  defined  to  be  an  inland  duty  or  impost  op- 
erating as  an  indirect  tax  on  the  consumer — a  fixed,  absolute, 
and  direct  charge  laid  on  merchandise,  products,  or  commod- 
ities.   Scholey  v.  Rew,  23  Wall.  331-346,  23  L.  Ed.  99-101. 
^  "  Levied,  assessed,  collected,  and  paid." 

The  important  word  "assessed"  is  used  in  this  Act  in  every  instance 
wherem  the  levy,  etc.,  of  the  tax  is  referred  to.  Further,  the  Act  pro- 
vides in  many  places  for  the  making  of  the  assessment  by  the  Commis- 
sioner, and  payment  of  the  assessment  by  the  taxpayer,  thus  making  it 
clear  that  the  Act  itself  does  not  constitute  the  complete  and  perfect 
imposition  of  the  tax. 

In  the  construction  of  this  Act — particularly  with  respect  to  "Liens" 
and  "Penalties",  this  phraseology  should  be  compared  with  that 
employed  in  former  acts  where  the  word  "assessed"  was  generally 
omitted  from  the  clause  imposing  the  tax,  although  frequently  em- 
ployed in  that  connection  indicating  the  date  at  which  the  statutory 
tax  period  was  to  begin.  12  Stat.  292,  432;  3  Stat.  223,  469;  14 
Stat.  98,  471. 
2 "  Annually." 

For  dates  of  assessment  and  payment,  see  pp.  72-73. 
»  "  Net  income,  etc." 
(See,  also,  Corporations,  p.  78). 

These  words,  as  used  in  this  act,  include  the  gross,  whole,  or  total 
receipts  of  the  preceding  calendar  year,  ending  December  31st  (p.  65) 
(the  taxable  income  for  the  year  ending  December  31st,  1913,  is  only 
that  accruing  for  the  period  between  March  1st  and  December  31st  of 
that  year),  less  such  items  as  are  declared  by  the  statute  to  be  exempt 
or  deductible.  The  net  income  for  the  tax  period  of  the  year,  1913,  is 
arbitrarily  provided  to  be  five-sixths  of  the  income  for  the  calenda.'' 
year. 


34  FEDERAL  INCOME  TAX  LAW 

endar  year  to  every  citizen  of  the  United  States,  whether 
residing  at  home  or  abroad,  and  to  every  person  residing 

Net  Income — Continued 

It  includes  the  share,  to  which  the  taxpayer  would  be  entitled,  of 
distributed  or  imdistributed  gains  and  profits  of  any  corporation  or 
partnership  formed,  or  fraudulently  availed  of  to  escape  the  tax  by 
allowing  the  accumulation  of  such  gains  or  profits. 

The  taxable  income  of  a  non-resident  alien  or  foreign  corporation 
is  the  gross  income  from  property  owned  and  business  carried  on  in 
the  United  States  by  such  alien  or  corporation,  less  the  statutory  ex- 
emptions and  deductions. 

The  term  income  as  used  in  this  act  must  be  carefully  differentiated 
from  the  same  term  as  employed  either  colloquially,  or  in  a  statute  of 
different  phraseology. 

Income  has  been  defined  as  follows: 
The  receipts  from  any  business  or  investment,  without  regard  to 
expenditures.    People  ex  rel.  McMaster  v.  The  Supervisors, 
4  Hill,  20,  cited  80  A.  D.  241;  86  A.  D.  413,  417. 
The  gain  which  accrues  from  property,  labor  and  business.    Mc- 
Clintock  V.  Dana,  106  Pa.  St.  386;  Thorn  v.  DeBreteuil,  86 
A.  D.  405-417,  83  N.  Y.  Supp.  849,  179  N.  Y.  64. 
Income  from  a  business  differs  from  that  of  a  "profession,  trade 
or  employment."    The  former  is  the  creation  of  combined 
capital,  industry,  and  skill.    Wilcox  v.  Coimty  Comrs.,  103 
Mass.  544,  546;  Commonwealth  v.  Ocean  Oil  Co.,  59  Pa.  St. 
61;  People  v.  Barker,  18  Wend.  605,  70  Hun  397,  24  N.  Y. 
Supp.  63;  Opinion  of  Justices,  5  Metcalfe,  596. 
Annual  income  includes  the  total  receipts  of  the  income  year,  al- 
though received  within  any  fractional  period  of  such  year, 
derived  from  a  business  or  vocation  which  can  be,  or  is  pur- 
sued for  only  a  part  of  the  year,  or  conveyed  away  before  the 
close  thereof.    Mandell  v.  Pierce,  3  Cliff.  134,  Fed.  Cas.  9008. 
For  definitions  of  kindred  terms,  see  Lawless  v.  Sullivan,  L.  R.  6 
A.  C.  373;  Mersey  Docks  v.  Lucas,  L.  R.  8  A.  C.  891,  905;  Last 
V.  London  Assurance  Corporation,  L.  R.  10  A.  C.  438,  450. 
Income,  applicable  to  individuals,  has  been  construed  to  include 
the  following: 
(See  also  page  78). 
Annuity  for  term  of  years,  even  though  received  as  a  legacy.    5 
I.  R.  R.  138;  7  I.  R.  R.  60;  Gresham  Life  Ins.  Society  v. 
Styles,  L.  R.  24  Q.  B.  D.  500. 
Articles  used  by  manufacturer,  salable  value  of.    Boutwell  (1863), 
254. 


THE   ACT,    ANNOTATED  35 

Income,  Individual — Continued 

Betting  profits,  where  derived  from  gaming  conducted  as  a  regular 
business.    Partridge  v.  Mallandaine,  L.  R.  28  Q.  B.  D.  276. 

Building  erected  by  tenant  to  become  the  property  of  the  owner  of 
real  estate.    6  I.  R.  R.  130. 

Contract. — Rule  for  estimating  net  income  on  partially  completed 
work  under;  T.  D.,  1675,  Feb.  14,  1911. 

Corporate  assets  distributed  upon  liquidation.  Income  therefrom 
being  difference  between  price  paid  for  stock  and  sum  re- 
ceived on  such  distribution.    2  I.  R.  R.  138. 

Debts  formerly  considered  bad,  but  paid  during  the  income  year. 
Boutwell,  274. 

Dividends.    3  I.  R.  R.  188. 

Dividends  payable  in  the  income  year,  no  matter  when  earned  or 
declared.    Boutwell,  274;  2  I.  R.  R.  44. 

Dividends  declared  by  mistake.  Central  Natl.  Bank  v.  United 
States,  137  U.  S.  355,  34  L.  Ed.  703, 11  S.  Ct.  126. 

Dividends  declared  and  payable,  although  not  collected.  Magee 
V.  Denton,  5  Blatch.  130,  Fed.  Cas.  8943. 

Dividends  divided  or  otherwise,  embracing  both  dividends  de- 
clared and  profits  partly  invested  in  real  estate  and  partly 
used  in  paying  debts  of  previous  years.  Collector  v.  Hubbard, 
79  U.  S.  1,  29  L.  Ed.  272. 

Dividends  applied  to  payment  of  renewal  premiums,  purchase  of 
paid-up  insurance,  etc.    T.  D.,  1743,  Dec.  16,  1911. 

Dividends  in  coin,  legal  tender,  value  of  at  time  when,  and  place 
where  dividend  payable.  5  I.  R.  R.  74;  Pacific  Ins.  Co.  v. 
Soule,  74  U.  S.  433,  19  L.  Ed.  95. 

Dividends  in  scrip  representing  profits  earned  during  period 
covered  by  the  act.  Bailey  v.  R.  R.  Co.,  106  U.  S.  109,  27 
L.  Ed.  81.  (Cited  in  137  U.  S.  364,  34  L.  Ed.  698;  48  Fed. 
541.) 

Dividends  in  scrip,  par  value  of.    5  I.  R.  R.  91. 

Dividends  in  scrip,  market  value  of.    7  I.  R.  R.  00. 

Dividends  represented  by  dividend-bearing  certificates  evidencing 
expenditure  of  earnings  and  convertible  into  stock  at  option 
of  the  Company,  although  conferring  no  right  to  vote.  Bailey 
V.  R.  R.  Co.,  22  AVall.  604,  22  L.  Ed.  840. 

(VoT  further  discussion  of  stock  dividends,  see  Contingent  In- 
come.) 

Extra  pay  granted  to  officers  by  statute.    2  I.  R.  R.  108. 

Farm  produce,  proceeds  of,  actually  or  constructively  sold  and 
delivered  within  income  year.    7  I.  R.  R.  59. 

Fees  paid  to  ministers  for  marriages  and  the  like.    7  I.  R.  R.  59. 


36  FEDERAL   INCOME   TAX   LAW 

Income,  Individual — Continued 

Gifts  to  ministers  when  in  nature  of  compensation.    7  I.  R.  R.  59; 

Inland  Revenues  v.  Strang,  15  So.  L.  R.  704. 
Gifts  to  employees  as  additional  compensation.    7  I.  R.  R.  35. 
Improvement  of  land  in  lieu  of  rent.    7  I.  R.  R.  60. 
Income  of  decedent  for  portion  of  income  during  which  life  con- 
tinued.   Mandell  v.  Pierce,  3  Cliff.  134,  Fed.  Cas.  9008. 
Income  of  an  inherited  foreign  estate  by  a  citizen,  formerly  of 

the  U.  S.,  who  has  become  a  citizen  of  the  foreign  country  to 

take  such  inheritance.    3  I.  R.  R.  140. 
Increase  in  value  of  unsold  property.   T.  D.,  1606,  March  29, 1910. 
Insurance  premiums  returned  by  mutual  life  insurance  company 

to  policy  holder  not  in  excess  of  those  paid  by  him.    6  I.  R.  R. 

139. 
Interest,   good  and  collectible,  accruing  during  year,   whether 

collected  or  not.    7  I.  R.  R.  59. 
Interest  paid  to  savings  bank  depositors.    Boutwell  (1863),  226. 
Interest  paid  to  savings  bank  depositors  in  the  form  of  a  pro  rata 

distribution  of  net  profits.   Gary  v.  Savings  Union,  89  U.  S. 

38,  22  L.  Ed.  779. 
Leases,  see  Profits. 
Mining,  see  Profits. 

Pensions  from  government.    4  I.  R.  R.  55;  Boutwell,  274. 
Prize  money  irrespective  of  date  of  captures.    7  I.  R.  R.  11. 
Profits  from  leases.    2 1.  R.  R.  44;  7 1.  R.  R.  59. 
Profits  of  partnerships  and  corporations,  though  undivided,  to 

which  taxpayer  is  entitled.    7  I.  R.  R.  60. 
Profits  from  sale  of  live  stock — being  gross  receipts  less  purchase 

price.    7  I.  R.  R.  58. 
Profits  on  sale  of  corporate  mining  property.    Perry  v.  Newsome, 

10  I.  R.  R.  20. 
Profits  on  sale  of  personal  property  received,  without  relation  to 

date  of  purchase.    11 1.  R.  R.  66;  2 1.  R,  R.  44;  1 1.  R.  R.  139. 
Profits  from  sale  of  real  estate.    T.  D.,  1606,  March  29,  1910. 
Profits  upon  sale  of  real  estate  equivalent  to  mortgage  and  re- 
conveyance.   3  I.  R.  R.  140. 
Profits,  pro  rata  share  of,  from  sale  of  real  estate  purchased  prior 

to  tax  year,  where  time  of  increase  in  value  not  accurately 

determinable.    T.  D.,  1606,  Mch.  29,  1910. 
Profits  from  exchange  of  stock  for  land  sold  within  the  income 

year.     United  States  v.   Smith,   1   Sawy.  277,  Fed.   Cas. 

16341. 
Profits  from  sale  of  stocks,  irrespective  of  date  of  increase  in  value. 

United  States  v.  Smith,  1  Sawy.  277,  Fed.  Cas.  16341. 


THE   ACT,    ANNOTATED  37 

Income,  Individual — Continued 

Profits  from  sale  of  stocke,  irrespective  of  date  of  purchase.  1 
I.  R.  R.  139. 

Profits  from  sale  of  stock,  represented  by  collectible  promissory 
notes.    United  States  v.  Smith,  1  Sawy.  277,  Fed.  Cas.  16341. 

Profits  from  sale  of  timber  standing  or  cut,  estimated  by  adding 
net  amount  received  to  value  of  land  after  removal  of  timber 
and  deducting  estimated  value  of  land  on  first  of  year.  1 
I.  R.  R.  171;2I.  R.  R.  61. 

Receipts  of  installments  of  purchase  price  of  land  received  during 
income  year.    T.  D.,  1606,  Mch.  29,  1910. 

Receipts  from  sale  of  patent  rights.    T.  D.,  1606,  Mch.  29,  1910. 

Rent,  excess  received  from  lease,  of  own  house  over  that  paid  for 
lease  of  another.   4 1.  R.  R.  46;  5  I.  R.  R.  154. 

Rent  of  land  received  in  shape  of  produce.    7  I.  R.  R.  60. 

Rent  received  in  shape  of  building  erected  bj'  tenant.    7 1.  R.  R.  60. 

Rent  for  privilege  of  working  open  mines,  though  mines  are 
thereby  exhausted.  Rule  of  estimation,  7  I.  R.  R.  60;  Mc- 
Clintock  V.  Dana,  106  Pa.  St.  386;  Eley's  App.,  2  Kulp 
(Pa.),  467,  103  Pa.  300. 

Stock — See  Dividends,  Profits. 
Income,   applicable   to  individuals,   has  been  construed   contin- 
gently to  include  the  following: 

Accounts  payable  to  taxpayer,  only  if  possessing  intrinsic  value 
and  convertible  into  money,  property,  or  available  assets. 
United  States  v.  Frost,  Fed.  Cas.  No.  15172. 

Interest,  only  v.hen  paid,  unless  collectible  and  remaining  unpaid 
by  consent  of  creditor.    Boutwell,  274. 

Promissory  notes,  only  when  having  intrinsic  value  and  con- 
vertible into  money,  property,  or  available  assets.  United 
States  V.  Frost,  Fed.  Cas.  No.  15172. 

Stock  dividends,  only  if  representing  division  of  profits.  Com- 
monwealth V.  Pittsburgh,  etc.,  Ry.  Co.,  74  Pa.  St.  83;  Com- 
monwealth V.  Erie,  etc.,  Ry.  Co.,  74  Pa.  St.  98. 

For  discussion  as  to  nature  of  stock  dividend  and  question  of 
income  dependent  thereon,  see  Smith  v.  Hooper,  95  Md.  16; 
Spooner  v.  Phillips,  62  Conn.  62,  24  A.  524, 16  L.  R.  A.  461. 
Income,  applicable  to  individuals,  has  been  construed  not  to  in- 
clude the  following: 

Accumulated  funds,  see  Dividends,  Funds,  Profits. 

Advance  in  value  of  personal  property,  see  Increase. 

Advance  in  value  of  real  property,  see  Increase. 

Allowance  made  by  father  to  son.  Corke  v.  Fry  (1896),  W.  N. 
(Eng.)  Part  I,  131. 


38  FEDERAL  INCOME  TAX  LAW 

Income,  Individual — Continued 

Annual  instalments  of  purchase  price  of  land.    Foley  v.  Fletcher, 

3  H.  &  N.  769. 
Annual  value  not  producing  income.    Troy  Factory  v.  Coming 

Winslow,  45  Barb.  247. 
Associations,  see  Profit. 
Capital,  bona  fide,  distributed  to  stockholders  with  corresponding 

reduction  of  capital  stock.    Commonwealth  v.  Central  Trans- 
portation Co.,  145  Pa.  St.  89,  22  A.  209;  Rose  v.  Barclay, 

191  Pa.  St.  597,  43  A.  385. 
Corporations,  see  Profits. 

Damages  for  personal  injuries.    3  I.  R.  R.  118;  7  I.  R.  R.  60. 
Dividend  in  stock,  representing  earnings  before  enactment  of 

Tax  Act.    2  I.  R.  R.  61.   See,  also.  Construction  of  Particular 

Acts. 
Dividend  in  stock,  not  dividing  assets  of  corporation  or  changing 

property  therein.    Commissioners  v.  Buckner,  48  Fed.  533. 
Dividend  in  stock,  made  after  distribution  of  net  earnings  and 

representing  nominal  increase.    1  I.  R.  R.  188. 
Farm  produce,  raised  during  income  of  previous  years,  remaining 

unsold  at  end  of  income  year.    2  I.  R.  R.  90;  11 1.  R.  R.  113. 
Farm  produce  consumed  in  immediate  family.    7  I.  R.  R.  58; 

United  States  v.  Simons,  1   Abb.   (U.  S.)  470,  Fed.  Cas. 

16291. 
Funds  accumulated  in  1863  from  net  earnings  turned  over  in 

1867  to  trustee  for  stockholders  not  income  of  stockholders 

for  1867.    Reynolds  v.  Williams,  4  Biss.  108,  Fed.  Cas.  11734. 
Income  from  personalty  held  by  trustee  for  non-resident  alien 

or  wife  of  alien.    3  I.  R.  R.  140;  6  I.  R.  R.  66. 
Increase  in  value  of  property,  estunated.    5  I.  R.  R.  154. 
Increase  in  value  of  stock,  until  after  sale.    1 1.  R.  R.  139. 
Increase  in  value  of  securities  during  series  of  years  not  income 

for  year  of  sale.    Gray  v.  Darlington,  15  Wall.  63,  82  L.  Ed. 

45;  Mercer  v.  Buchanan,  132  Fed.  508;  1  I.  R.  R.  139;  cp. 

United  States  v.  Smith,  12  I.  R.  R.  135. 
Increase  in  value  of  building  caused  by  permanent  improvements. 

Boutwell,  275;  Little  v.  Little,  161  Mass.  188,  36  N.  E.  795. 
Interest  derived  from  foreign  investments  and  reinvested  abroad. 

Forbes  v.  Scottish  Inst.  (1896),  W.  N.  (Eng.)  Part  1, 122. 
Moneys  received  by  way  of  damages,  see  Damages. 
Note,  received  as  purchase  price  of  sale  made  one  year,  but  not 

due  and  payable  until  succeeding  year,  not  income  for  year 

received.    United  States  v.  Ronzone,  14  Blatch.  69;  Fed.  Cas. 

16192. 


THE    ACT,    ANNOTATED  3d 

in  the  United  States,  though  not  a  citizen  thereof,^  a  tax 
of  1  per  centum  per  annum  upon  such  income,  except  as 

Income,  Individual — Continued 

Profits,  see  Funds. 

Profits  of  incorporated  companies  or  associations  having  dis- 
tinct entity,  in  which  individual  is  interested.  10  I.  R.  R.  39; 
T.  D.,  1675,  Feb.  14,  1911. 

Profits  used  for  construction  or  carried  to  account  of  any  fund 
already  taxed  in  one  j^ear,  not  again  taxable  as  income  of 
stockholder.  Bailey  v.  Railroad  Co.,  100  U.  S.  109,  27  L. 
Ed.  81. 

Profits  applied  to  enlargement  of  business.  Ex  parte  Ives,  Fed. 
Cas.  No.  7114. 

Profits,  prospective,  upon  executory  contract  of  sale.  1  I.  R  .R. 
139. 

Rental  value  of  living  quarters  in  employer's  building.  Tenant 
V.  Smith  (1892),  App.  Cas.  161. 

Rental  value  of  manse  occupied  by  a  minister.  M'Dougal  v. 
Southerland  (1896),  W.  N.  (Eng.),  Part  I,  113. 

Silent  partner,  rule  as  to  gains  of.    41.  R.  R.  46. 

Stock  received  from  bona  fide  exchange  of  other  stocks  regardless 
of  apparent  profit  resulting  therefrom.  United  States  v. 
Smith,  1  Sawy.  277,  Fed.  Cas.  16341. 

Stock  of  consolidated  company  received  in  exchange  for  stock  of 
component  company.  City  of  Allegheny  v.  Federal  Street  & 
P.  V.  R.  R.  Co.,  179  Pa.  St.  424,  36  A.  320. 

Stock  issued  after  beginning  of  tax  period,  representing  property 
purchased  at  foreclosure  of  mortgages  held  to  secure  loans 
made  before  passage  of  Tax  Act.    C,  B.  &  Q.  R.  R.  Co.  v. 
Page,  1  Biss.  461,  Fed.  Cas.  2668. 
1 "  Every  citizen,  etc." 

For  the  purposes  of  income  taxation,  four  classes  of  persons  must 
be  considered:  the  resident  citizen,  the  non-resident  citizen, 
the  resident  alien,  and  the  non-resident  alien  having  income- 
producing  property  within  the  United  States. 

The  act  clearly  provides  for  the  payment  of  the  tax  upon  the 
entire  net  income  of  citizens  resident  and  non-resident,  and 
all  resident  aliens.  The  non-resident  alien  is  taxed  only 
upon  the  net  income  of  property  owned,  and  business,  trade, 
or  profession  carried  on  in  the  United  States  by  him. 

There  can  be,  of  course,  no  question  as  to  the  power  of  Congress 
to  levy  a  tax  upon  the  first  three  classes.  As  to  the  taxation  of 
non-resident  aliens,  see  pp.  26,  42,  56. 


40  FEDERAL  INCOME  TAX  LAW 

Citizens — Statutory  definition 

All  persons  tx)m  or  naturalized  in,  and  subject  to  the  jurisdiction 

of  the  United  States.    U.  S.  Cons.,  14th  Amend. 
All  persons  bom  in  the  United  States  and  not  subject  to  any 

foreign  power,  excluding  Indians  not  taxed.    U.  S.  R.  S., 

§  1992. 
All  children  born  outside  of  the  limits  and  jurisdiction  of  the 

United  States,  whose  fathers  arc,  at  the  time  of  their  birth, 

citizens  thereof,  except  children  whose  fathers  never  resided 

therein.     U.  S.  R.  S.,  §  1993. 
Any  woman  married  to  a  citizen  of  the  United  States,  who  is, 

herself,  one  of  the  class  who  may  be  lawfully  naturalized. 

U.  S.  R.  S.,  §  1994. 
Children,  minor,  of  parents  naturalized  or  citizens  of  a  state,  on 

April  14th,  1802,  if  dweUing  in  U,  S.    Rev.  Stat.,  §  2172. 
Children  of  parents  who  were  on  April  14,  1802,  or  had  been  citi- 
zens of  the  United  States,  though  bom  out  of  the  limits  and 

jurisdiction  of  the  United  States.    Rev.  Stat.,  §  2172. 
Inhabitants  of  Philippines  or  Porto  Rico,  formerly  Spanish  sub- 
jects, living  therein,  subsequent  to  April  11,  1899.    Treaty  of 

Paris,  Art.  IX,  30  Stat.  1754;  31  Stat.  79;  32  Stat.,  Pt.  I, 

692. 
Spaniards  residing  in  Porto  Rico  or  the  Philippines,  on  April  1 1 , 

1899,  who  continued  to  reside  there  after  that  date,  and  ditl 

not,  within  one  year,  file  a  declaration  of  allegiance  to  Spain. 

Treaty  of  Paris,  Art.  IX,  30  Stat.  1754;  31  Stat.  79;  32  Stat., 

Pt.  1, 692. 
Judicial  and  departmental  construction 

Age  or  majority — Citizenship  not  dependent  upon.    Abb.  L.  Diet. 

224. 
Alien,  see  Woman. 
Children  born  in  United  States  are  citizens,  regardless  of  alien 

parentage  (for  exceptions  see  Aliens,  p.  42).     10  Ops.  Atty. 

Gen.  382;  United  States  v.  Wong  Kim  Ark.,  169  U.  S.  649, 

42  L.  Ed.  890,  18  S.  Ct.  456. 
Children  bom  on  ocean,  of  citizen  parents,  are  citizens.    United 

States  V.  Wong  Kim  Ark,  169  U.  S.  649,  42  L.  Ed.  890,  18 

S.  Ct.  456. 
Children  of  white  father  and  Indian  mother  living  apart  from 

tribe,  bom  within  United  States,  are  citizens.   U.  S.  v.  Hadley, 

99  Fed.  437;  U.  S.  v.  Ward,  42  Fed.  320. 
Children  born  in  foreign  country,  of  citizen  parents,  are  citizens. 

Ware  v.  Wisner,  50  Fed.  310. 
Children,  minor,  of  naturalized  parents,  dwelling  within  United 


THE   ACT,   ANNOTATED  41 

Citizens,  Judicial  construction — Continued 

States  at  time  of  naturalization,  are  citizens.     Campbell  v. 

Gordon,  6  Cranch,  176,  3  L.  Ed.  190. 
Citizens  are  persons  owing  allegiance  to,  and  having  reciprocal 

claim  upon  the  protection  of  a  government:  members  of  a 

nation  or  of  the  body  politic  of  a  sovereign  state.    Abb.  L. 

Diet.,  223. 
Citizenship,    federal — Not    dependent    upon    state    citizenship. 

United  States  v.  Wong  Kim  Ark,  169  U.  S.  649,  42  L.  Ed.  890, 

18  S.  Ct.  456. 
Citizenship  of  children  born  abroad  dependent  on  status  of  father. 

Ludlam  v.  Ludlam,  31  Barb.  486;  Davis  v.  Hall,  1  Nott.  & 

M.  292;  Sasportas  v.  De  la  Motta,  10  Rich.  Eq.  38. 
Consuls,  children,  born  in  United  States,  of  foreign  consuls,  not 

expressly  having  additional  diplomatic  functions,  are  citizens. 

U.  S.  V.  Wong  Kim  Ark,  169  U.  S.  619,  42  L.  Ed.  890,  18  S. 

Ct.  456. 
Franchise,  right  to  exercise — Citizenship  not  dependent  upon. 

10  Ops.  Atty.  Gen.  382,  387;  Minor  v.  Happersett,  21  Wall. 

162,  22  L.  Ed.  627;  Van  Volkenburg  v.  Brown,  43  Cal.  43, 

13  Am.  Rep.  136,  cp.  White  v.  Clements,  39  Ga.  232;  Amy  v. 

Smith,  1  Litt.  326. 
Half-breed,  see  Children. 
Indians,  see  Aliens,  p.  42. 
Indian  woman  becomes  citizen  by  leaving  tribe  and  marriage  to 

citizen.    Hatch  v.  Ferguson,  57  Fed.  959. 
Interference,  United  States  will  never  exercise,  to  disturb  relation- 
ship of  children  born  abroad,  while  there  remaining.    13  Op. 

Atty.  Gen.  89. 
Majority,  see  Age. 
Minors,  see  Children. 

Property  rights — Not  a  test  of  citizenship.    Abb.  L.  Diet.  225. 
Race — Citizenship  not  dependent  upon.     Abb.   L.   Diet.   224; 

United  States  v.  Wong  Kim  Ark,  169  U.  S.  649,  42  L.  Ed. 

890,  18  S.  Ct.  456;  Re  Rodriguez,  81  Fed.  353. 
Sex — Citizenship  not  dependent  upon.     U.  S.  v.  Anthony,   11 

Blatch.  200,  Fed.  Cas.  14459;  Minor  v.  Happersett,  21  Wall. 

162,  22  L.  Ed.  627;  U.  S.  v.  Reese,  92  U.  S.  214,  23  L.  Ed. 

563. 
Woman,  alien,  becomes  citizen  by  marriage  to  citizen,  regardless 

of  time  or  place  of  marriage,  non-residence  in  United  States, 

non-entrance  into  United  States,  or  life  apart  from  husband. 

Shanks  v.  Dupont,  3  Pet.  242,  7  L.  Ed.  666;  Headman  v. 

Rose,  63  Ga.  458;  Burton  v.  Burton,  40  N.  Y.  359;  10  Ops. 


42  FEDERAL   INCOME   TAX   LAW 

Citizens,  Judicial  Construction — Continued 

Atty.  Gen.  321;  14  Op.  Atty.  Gen.  402.    See  Kelly  v.  Owen, 
7  Wall.  496,  19  L.  Ed.  283. 

Woman  marrying  alien,  resident  of  United  States,  with  purpose 
there  to  continue  residence,  does  not  become  alien,  by  mar- 
riage. Whether  right  of  expatriation  declared  by  Revised 
Statutes,  §  1999,  includes  citizens  of  United  States  or  only 
foreigners,  expatriation  cannot  be  effected  without  actual 
departure  from  the  country.  Comitis  v.  Parkerson,  56  Fed. . 
556. 

Woman  does  not  lose  citizenship  by  marriage  to  alien,  without 
withdrawal  from  United  States  or  equivalent  act  expressive 
of  expatriation.    Ruckgaber  v.  Moore,  104  Fed.  948. 
Aliens — Judicial  and  departmental  construction 

Alienage  may  be  resumed  by  woman  who  has  become  citizen  by 
marriage,  through  divorce  and  re-marriage  to  an  alien.  Pe- 
quignot  v.  Detroit,  16  Fed.  211,  Contra,  15  Ops.  Atty.  Gen. 
599. 

All  persons  bom  out  of  the  jurisdiction  of  the  United  States,  and 
who  are  not  citizens  thereof  by  statutory  declaration  or 
naturalization  are  aliens.  Abb.  L.  Diet.  51 ;  Lj'nch  v.  Clarke, 
1  Sandf.  Ch.  583,  668;  Ex  parte  Dawson,  3  Brad.  130,  136; 
Mcgrcgor  v.  Mcgregor,  33  How.  Pr.  456. 

Children  of  alien  enemies,  born  in  a  part  of  this  country  at  the 
time  in  hostile  occupation,  are  aliens.  United  States  v.  Wong 
Kim  Ark,  169  U.  S.  649,  42  L.  Ed.  890,  18  S.  Ct.  456. 

Children  of  ambassadors,  or  diplomatic  or  official  representatives 
of  another  sovereignty,  although  born  in  the  United  States, 
are  aliens.  United  States  v.  Wong  Kim  Ark,  169  U.  S.  649, 
42  L.  Ed.  890,  18  S.  Ct.  456. 

Children  bom  on  foreign  war  vessel  in  a  United  States  port  are 
aliens.   The  Exchange,  7  Cranch,  137,  147,  3  L.  Ed.  294. 

Children,  minor,  of  naturalized  aliens,  born  abroad  and  who  re- 
main abroad  until  after  parents'  naturalization,  are  aliens. 

Zaratrian  v.  BiUings,  Comr.,  204  U.  S.  170,  51  L.  Ed.  428. 

Indian,  even  though  separated  from  his  tribe  and  having  his  resi- 
dence among  white  citizens,  is  an  alien.  Elk  v.  Wilkins,  112 
U.  S.  94,  28  L.  Ed.  643,  5  S.  Ct.  41. 

Wife,  see  Citizenship, 
.  Woman  married  to  citizen  of  France,  and  there  residing,  even 
though  never  having  complied  with  formality  required  by 
code  to  make  her  a  citizen,  became  such  through  marriage 
and  is  not  taxable  as  a  citizen  of  United  States.  13  Ops.  Atty. 
Gen.  128. 


THE    ACT,    ANNOTATED  43 

hereinafter  provided;  and  a  like  tax  shall  be  assessed, 
levied,  collected,  and  paid  annually  upon  the  entire  net 
income  from  all  property  owned  and  of  every  business, 
trade,  or  profession  carried  on  in  the  United  States  ^  by 
persons  residing  elsewhere.  ^ 

1  Doing  business — Individuals 

The  following  decisions  and  those  on  p.  53,  relating  to  corpora- 
tions, although  rendered  in  connection  with  various  subjects, 
have  been  included  as  probably  useful  for  purposes  of  com- 
parison: 

Individuals  living  in  one  state,  sending  agents  to  another  to  settle 
accounts  and  make  contracts,  held  doing  business  in  latter. 
EUiott  V.  Parlin  &  Orendorff  Co.,  81  P.  500,  71  Kan.  665. 

Partnership,  foreign,  engaged  in  wine  business,  none  of  whose  mem- 
bers was  resident  in  England,  having  chief  office  in  France 
and  resident  agent  in  London,  through  whom  wine  was  sold 
and  money  received,  held  taxable  in  England  as  to  such 
receipts.  Pomery  &  Greno  v.  Apthorpe,  56  L.  J.  Rep.  N.  S. 
Q.  B.  155.. 

Partnership,  foreign,  engaged  in  wine  business,  employing  English 
firm  to  obtain  orders  in  England,  which  orders  were  sent  to 
home  office;  keeping  no  wine  in  England;  filling  all  orders 
from  home  office  by  direct  shipment  to  customer,  at  his  risk; 
and  receiving  payment  directly  from  customer,  held  taxable  in 
England.    Werele  &  Co.  v.  Colquhoun,  20  L.  R.  Q.  B.  D.  753. 

Partnership,  foreign,  one  member  of  which  spent  portion  of  each 
year  in  England  taking  orders,  and  which  had  agents  in 
England,  who  guaranteed  and  collected  accounts  thus  accru- 
ing, and  an  office  room  and  clerk,  in  such  agent's  building, 
held  taxable  in  England  as  to  profits,  although  tax  already 
paid  thereon  by  agents.  Tischler  v.  Apthorpe,  52  Times  L. 
R.  N.  S.  814. 

Partnership  having  one  partner  in  England  to  purchase  goods 
shipped  to  New  York  and  sold,  held  foreign  as  to  England, 
and  its  profit  arising  in  United  States.  Sully  v.  Atty.  Gen., 
5  H.  &  N.  711. 

Person,  whose  only  business  in  a  state  is  to  appoint  persons  to 
conduct  a  business,  is  not  doing  such  business  within  such 
state.    Morgan  v.  White,  101  Ind.  413. 
*  Resident. 

For  explanation  of  liability  of  non-resident  aliens  under  the  various 
prior  acts,  see  9  I.  R.  R.  113, 139. 


44  FEDERAL  INCOME   TAX   LAW 

Subdivision  2.  In  addition  to  the  income  tax  provided 
under  this  section  (herein  referred  to  as  the  normal  in- 
Resident — Continued 

Residence  is  a  settled  fixed  abode  with  present  idea  of  permanency, 
as  contradistinguished  from  a  mere  temporary  locality  of 
existence.  Brisenden  v.  Chamberlain,  53  Fed.  307,  308;  Mat- 
ter of  Wrigley,  8  Wend.  134;  Houghton  v.  Ault,  16  How.  Pr. 
77;  Reeder  v.  Holcomb,  105  Mass.  93;  Barron  v.  Burke,  82  111. 
App.  116;  Long  v.  Ryan,  30  Grat.  (Va.)  718. 

A  resident  is,  however,  frequently  defined  with  greater  liberality, 
as  one  who  dwells,  abides,  or  lives  in  a  place  (U.  S.  v.  Penelope, 
Fed.  Cases,  16024;  Burrill's  Law  Diet.;  Brown  v.  Ashbough, 
40  How.  Pr.  260,  263). 

For  many  purposes,  a  person  may  have  several  residences  at  the 
same  time.  Bartlett  v.  The  Mayor  &c.  of  City  of  N.  Y.,  7 
N.  Y.  Sup.  Ct.'44;  Barron  v.  Burke,  82  111.  App.  116. 

Intent  is  generally,  but  not  always,  the  determining  factor  (Thayer 
V.  City  of  Boston,  124  Mass.  132,  26  Am.  Rep.  650;  Cabot  v. 
City  of  Boston,  66  Mass.  52),  and  residence  will  not  be  estab- 
lished by  transient  visits,  or  temporary  sojourn  for  business, 
or  otherwise  (Arnold  v.  Davis,  8  R.  1. 341;  Boardman  v.  House, 
18  Wend.  512) ;  or  by  mere  entrance  into  a  new  place,  after 
abandonment  of  all  dwellings  in  a  former  residence.  Burrows 
V.  Miller,  4  How.  Pr.  349. 

On  the  other  hand,  it  may  include  abode  in  a  place  without  intent 
to  live  elsewhere  (Heidenbach  v.  Schland,  10  How.  Pr.  477) ; 
a  more  or  less  indefinite  sojourn  (Pooler  v.  Maples,  1  Wend. 
65;  Clark  v.  Likens,  26  N.  J.  Law,  207;  Walker  v.  Walker,  1 
Mo.  App.  404) ;  or  an  entrance  into  the  state  with  intent  to 
remain,  although  a  home  has  not  yet  been  secured.  Cox  r. 
AUen,  91  la.  462,  59  N.  W.  335. 

Neither  the  location  of  the  domicile  or  legal  residence,  nor  the 
question  of  investment  with  the  full  rights  or  obligations  of  a 
citizen,  necessarily  determines  the  actual  residence.  Crawford 
V.  Wilson,  4  Barb.  504;  Bartlett  v.  The  Mayor  &c.  of  City  of 
N.  Y.,  7  N.  Y.  Sup.  Ct.  44;  Atty.  Gen.  v.  Coote,  4  Price,  183; 
Frost  V.  Brisben,  19  Wend.  11. 

An  important  consideration  is  the  location  of  home  and  family 
(Chaine  v.  Wilson,  1  Bosw.  673;  8  Abb.  Pr.  78;  Cunningham 
T.  Mound,  2  Ga.  171 ;  Nugent  v.  Bates,  51  la.  77;  50  N.  W.  76; 
33  Am.  St.  Rep.  117;  Long  v.  Ryan,  30  Grat.  (Va.)  718; 
Rogers  v.  Inland  Revenue,  16  Sc.  L.  R.  682;  1  Tax  Cases,  225; 
Re  Young,  12  Sc.  L.  R.  602;  1  Tax  Cases,  57),  although  this  is 


THE   ACT,    ANNOTATED  45 

come  tax)  there  shall  be  levied,  assessed,  and  collected 
upon  the  net  income  of  every  individual  an  additional 

Resident — Continued 

not  conclusive.    Didier  v.  Patterson,  93  Va.  534,  25  S.  E.  661. 

Where  the  home  is  in  several  places  at  different  seasons  of  the  year, 
the  location  of  the  principal  place  of  business  is  an  element  for 
consideration.    Bartlett  v.  The  Mayor,  7  N.  Y.  Sup.  Ct.  44. 

Residence  is  not  affected  by  temporary  absence  (People  ex  rcl. 
Lorillard  v.  Barker,  70  Hun,  397,  24  N.  Y.  S.  63,  54  St.  Rej). 
107;  Church  v.  Rowell,  49  Maine,  367),  even  where  such 
absence  is  long  continued  because  of  the  exigencies  of  business. 
Rogers  v.  Inland  Revenue,  16  Sc.  L.  R.  682;  1  Tax  Cases, 
225;  Re  Young,  12  Sc.  L.  R.  602;  1  Tax  Cases,  57. 

Once  acquired,  it  is  presumed  to  continue,  in  default  of  satisfactory 
evidence  of  termination  (Re  Nichols,  54  N.  Y.  62),  which  is 
not  effected  by  intent,  alone,  without  actual  removal.  Stod- 
dart  V.  Ward,  31  Md.  562;  100  Am.  Dec.  83. 

If  levy  for  the  year  has  been  completed  before  actual  removal,  its 
assessment  against  the  person  so  removing  is  valid.  Stoddart 
V.  Ward,  31  Md.  562,  100  Am.  Dec.  83. 

As  applied  to  taxation,  the  question  of  residence  is  one  of  fact,  to 
be  determined  by  the  jury.    Bailey  v.  Bull,  5  Barb.  158. 

While  residence,  for  purposes  of  general  taxation,  is  generally  held, 
as  in  other  cases,  to  depend  largely  upon  intent  of  the  tax- 
payer, (Thayer  v.  City  of  Boston,  124  Mass.  132;  Cabot  v. 
City  of  Boston,  66  Mass.  52),  it  has  been  construed  very  liber- 
ally toward  the  Government  where  involving  an  income  tax, 
so  that  there  have  been  held  taxable,  as  residents: 

A  person  living  on  his  yacht,  in  full  commission,  in  English  waters. 
Brown  v.  Burt,  81  L.  J.  K.  B.  17: 

A  Leghorn  merchant,  owner  of  a  Scotch  estate,  occupied  by  him 
for  a  few  months  each  year.  Lloyd  v.  Sully,  21  Sc.  L.  R.  482, 
2  Tax  Cases,  37: 

An  American  citizen  in  business  in  the  United  States,  spending  a 
small  part  of  each  year  shooting  on  a  leased  Scotch  estate. 
Cooper  V.  Cadwallader,  42  Scot.  L.  R.  117,  5  Tax  Cas.  101: 

A  person  having  an  establishment  outside  of  England,  but  main- 
taining in  London  a  rented,  furnished  house,  where  he  spent 
a  small  part  of  the  year.    Atty.  Gen.  v.  Coote,  4  Price,  183: 

A  corporation  having  its  principal  office  in  the  country.  Goerz  v. 
Bell,  2  K.  B.  136,  90  L.  Times  R.  675;  Chesna  Sulphur  Co.  v. 
Nicholson,  1  Exch.  Div.  437, 35  L.  Times  R.  275;  New  Zealand 
Shipping  Co.  v.  Stephens,  24  L.  Times  R.  172,  5  Tax.  Cas.  553. 


46 


FEDERAL   INCOME    TAX   LAW 


income  tax  (herein  referred  to  as  the  additional  tax)  of  1 
per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $20,000  and  does  not  exceed 
$50,000,  and  2  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $50,000  and  does 
not  exceed  $75,000,  3  per  centum  per  annum  upon  the 
amount  by  which  the  total  net  income  exceeds  $75,000 
and  does  not  exceed  $100,000,  4  per  centum  per  annum 
upon  the  amount  by  which  the  total  net  income  exceeds 
$100,000  and  does  not  exceed  $250,000,  5  per  centum  per 
annum  upon  the  amount  by  which  the  total  net  income 
exceeds  $250,000  and  does  not  exceed  $500,000,  and  6  per 
centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $500,000. 

.\11  the  provisions  of  this  section  relating  to  individuals 
who  are  to  be  chargeable  with  the  normal  income  tax,  so 
far  as  they  are  applicable  and  are  not  inconsistent  with 
this  subdivision  of  paragraph  A,  shall  apply  to  the  levy, 
assessment,  and  collection  of  the  additional  tax  imposed 
under  this  section.^ 

1  The  amount  of  tax  laid  by  the  act  upon  net  income  is  shown  in  the 
following  table.   Note  statutory  deductions  and  exemptions. 

On  the  first  $3,000  ($4,000,  see  p.  65)  Exempt 

On  next  $  17,000  or  fraction  thereof  (normal  tax  only) 

(normal  tax  1% 
surtax  1%) 

(normal  tax  1% 


$  30,000  " 
$  25,000  " 
$  25,000  " 
$150,000  " 
$250,000  " 
1  in  excess  of  $500,000 


surtax  2%) 

(normal  tax  1% 
surtax  3%) 

(normal  tax  1% 
surtax  4%) 

(normal  tax  1% 
surtax  6%)    . 

(normal  tax  1% 
surtax  6%) 


1% 
2% 
3% 
4% 
5% 
6% 
7% 


THE   ACT,    ANNOTATED  47 

Every  person  subject  to  this  additional  tax  shall,  for 
the  purpose  of  its  assessment  and  collection,  make  a 
personal  return  of  his  total  net  income  from  all  sources, 
corporate  or  otherwise,  for  the  preceding  calendar  year, 
under  rules  and  regulations  to  be  prescribed  by  the  Com- 
missioner of  Internal  Revenue  and  approved  by  the 
Secretary  of  the  Treasury.^ 

The  statute  is  not  clear  as  to  whether  the  deduction  of 
Three  thousand  dollars  ($3,000)  is  to  be  made  in  deter- 
mining the  net  income  for  the  purpose  of  computing  the 
additional  tax. 

The  table,  as  given  on  the  foregoing  page,  is  based  upon 
what  appears  to  be  the  intent  of  the  statute,  but  the  point 
must  be  determined  by  judicial  construction. 

Note  the  increase  of  exemption  to  Four  thousand  dollars 
($4,000)  in  case  of  marriage  (p.  65). 

1  Return: 

Return,  as  used  in  this  act,  signifies  a  statement  in  writing,  in  the 
prescribed  form,  made  and  verified  by,  or  on  behalf  of  a  tax- 
payer, and  containing  the  information  specified  by  the  stat- 
ute.   (See  pp.  66,  102.) 

Return,  as  applicable  to  individuals — Statutory  provisions: 

(See,  also,  pp.  66,  102). 

(As  to  right  of  taxpayer  to  require  preparation  of  return  by  col- 
lector, see  p.  122). 

(As  to  filing  affidavit  and  statement  for  exemption,  see  p.  74). 

Statutory  requirements  as  to  filing  individual  returns  are  shown 
by  the  following  table : 

Time:  On  or  before  March  1st  of  each  year,  beginning  with  the 
year  1914  (p.  65). 

Place:  By  resident:  Office  of  Collector  of  Internal  Revenue  for 
the  district  of  taxpayer's  residence  or  principal  place  of 
business: 

By  non-resident:  Ofl&ce  of  Collector  of  the  district  in  the 
United  States  in  which  taxpayer's  principal  business  is  con- 
ducted (p.  65).    1 1.  R.  R.  153. 

Period  covered:  Preceding  year,  ending  December  31st  (p.  65). 

By  whom  made,  verified,  and  filed: 


48  FEDERAL   INCOME   TAX   LAW 

For  the  purpose  of  this  additional  tax  the  taxable  in- 
come of  any  individual  shall  embrace  the  share  to  which 
he  would  be  entitled  of  the  gains  and  profits,  if  divided  or 
distributed,  whether  divided  or  distributed  or  not,  of  all 

Return,  Individuals — Continued 

(a)  Every  citizen,  resident  or  non-resident  in  the  United  States, 
having  an  income,  during  the  preceding  tax  year,  of  three 
thousand  dollars,  or  over  (pp.  34,  65). 
(6)  Every  aUen,  resident  in  the  United  States,  having  an  in- 
come, during  the  preceding  tax  year,  of  three  thousand  dollars, 
or  over  (pp.  39,  65). 
(c)  Every  non-resident  alien,  having  an  income  of  three  thou- 
sand dollars,  or  over,  from  property  owned,  or  business,  trade, 
or  profession  carried  on  in  the  United  States  (pp.  43,  65). 
As  to  the  constitutionality  of  the  texation  of  non>-resident  aliens, 

see  p.  20. 
As  to  judicial  constructions  of  what  is  carrying  on  a  business,  trade, 

or  profession  in  any  particular  territory,  see  p.  43. 
Exceptions:  No  return  is  required  of 

(a)  Income  not  exceeding  three  thousand  dollars  (p.  65) ; 
(6)  Income  derived  from  dividends  on  capital  stock  or  net 
earnings  of  corporations,  joint  stock  companies,  associations, 
or  insurance   companies    taxable  upon    their   net    income 
(p.  69,  cp.  75); 
(c)  Income  of  which  return  has  been  made  at  the  source  (p.  71). 
Note  that  but  one  deduction  of  three  thousand  dollars  can  be 
made  from  the  income  of  any  individual  in  determining 
whether  a  return  thereof  must  be  made,  and  that  such  deduc- 
tion once  having  been  made,  either  by  the  individual,  or  by 
the  source,  all  other  taxable  income  must  be  returned  (p.  72). 
Contents  of  return: 

(a)  A  statement  of  the  gross  amount  of  income  from  all  separate 

sources; 
(6)  The  aggregate  statutory  deductions  claimed; 
(c)  Taxable  net  income. 
While  the  words  of  the  statute,  literally  construed,  would  require 
mere  totals  of  income  and  credits  to  be  returned,  the  form 
of  return  is  provided  to  be  such  as  shall  be  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with  approval  of  the 
Secretary  of  the  Treasury,  and  will  be  found  to  require  a 
much  greater  detail. 
The  return  of  a  non-resident  ahen  is,  in  general,  the  same  as  that 


THE   ACT,    ANNOTATED  49 

"corporations,  joint  stock  companies,  or  associations 
however  created  or  organized,"  formed  or  fraudulently 
availed  of  for  the  purpose  of  preventing  the  imposition 
of  such  tax  through  the  medium  of  permitting  such  gains 

Return,  Individuals — Continued 

of  a  citizen,  except  tliat  the  income  therein  set  forth  is  that 
derived  from  property  owned  and  business,  trade  or  profes- 
sion carried  on  in  the  United  States  (p.  43),  and  the  de- 
ductions therein  claimed  are  those  incurred  in  connection 
with  such  property  and  business,  etc.  (p.  64). 

Return,  as  applicable  to  individuals — Construction: 

(See,  also,  pp.  71,  110.) 

Statutory  requirements  as  to  individual  returns  have  been  con- 
strued as  follows: 

Items  returnable: 

Accounts,  uncollected,  at  estimated  value.   Boutwell,  273. 

Cost,  see  Stock. 

Debts  formerly  considered  bad,  but  paid  during  income  year. 
Boutwell,  274. 

Decedents,  income  of,  received  during  portion  of  year  prior  to 
death,  returnable  by  executor.  Mandell  v.  Pierce,  3  Cliff. 
134;  Fed.  Cas.  9008;  7 1.  R.  R.  193;  contra,  2  I.  R.  R.  54. 

Dividends  in  scrip,  at  par  value.   5  I.  R.  R.  91. 

Dividends  declared,  but  uncollected.  Magee  v.  Denton,  5  Blatch. 
130;  Fed.  Cas.  8943. 

Fees,  see  Lawyers,  Pliysicians. 

Husband,  separate  income  of.    1  I.  R.  R.  188. 

Income,  see  Husband,  Wife,  Decedent. 

Income  of  portion  of  legacy  transferred  by  executor  to  legatee 
returnable  by  legatee.    7  I.  R.  R.  59. 

Lawyers'  fees — On  basis  of  either  annual  fees,  or  amounts  be- 
coming due  within  tax  year.   (See  Rules,  below.)   7 1.  R.  R.  59. 

Manufacturer,  see  Stock. 

Pensions,  government.    4  I.  R.  R,  55;  Boutwell,  274. 

Physicians'  fees — On  basis  of  either  annual  fees,  or  amounts  be- 
coming due  within  tax  year.  (See  Rules,  below.)  7  I.  R.  R. 
59. 

Rent  received  by  person  renting  own  house  and  paying  rent  else- 
where.  4 1.  R.  R.  46;  5 1.  R.  R.  154. 

Salary  of  minor  child,  portion  of,  not  subject  to  special  salary  tax. 
7  I.  R.  R.  59. 


50  FEDERAL  INCOME  TAX  LAW 

and  profits  to  accumulate  instead  of  being  divided  or 
distributed;  and  the  fact  that  any  such  "corporation, 
joint  stock  company,  or  association  is  a  mere  holding 
company,"  or  that  the  gains  and  profits  are  permitted  to 
accumulate  beyond  the  reasonable  needs  of  the  business 
shall  be  prima  facie  evidence  of  a  fraudulent  purpose  to 
escape  such  tax;  but  the  fact  that  the  gains  and  profits 
are  in  any  case  permitted  to  accumulate  and  become  sur- 
plus shall  not  be  construed  as  evidence  of  a  purpose  to 
escape  the  said  tax  in  such  case  unless  the  Secretary  of  the 
Treasury  shall  certify  that  in  his  opinion  such  accumula- 
tion is  unreasonable  for  the  purposes  of  the  business. 
When  requested  by  the  Commissioner  of  Internal  Revenue, 
or  any  district  collector  of  internal  revenue,  such  *'  corpora- 
tion, joint  stock  company,  or  association."  shall  forward 
to  him  a  correct  statement  of  such  profits  and  the  names 
of  the  individuals  who  would  be  entitled  to  the  same  if 
distributed.    (See  p.  67). 

B.  That,  subject  only  to  such  exemptions  and  deduc- 
tions as  are  hereinafter  allowed,  the  net  income  of  a 
taxable  person  shall  include  gains,  profits,  and  income  de- 
rived from  salaries,  wages,  or  compensation  for  personal 
service  of  whatever  kind  and  in  whatever  form  paid,  or 

Return,  Individuals — Continued 

Stock,  cost  value  of.   3 1.  R.  R.  109. 

Wages,  property  of  minor,  returnable  by  himself.    11 1.  R.  R.  122 
Wife,  separate  income  of,  returnable  by  hersell.    1  I.  R.  R.  188* 
2  1.  R.  R.  61;7L  R.  R.  59. 

Items  not  returnable: 

Farm  produce  consumed  by  farmer's  family.   7  I.  R.  R.  58. 
Less  than  statutory  income.    13 1.  R.  R.  97. 
Wages  of  minor,  property  of  himself,  not  returnable  by  parent. 
11 1.  R.  R.  122. 

Rides: 

Method  of  making  return,  once  adopted,  should  not  be  thereafter 

changed.    3  I.  R.  R.  109;  7  I.  R.  R.  59. 
Returns  based  on  any  other  period  than  tax  year  not  acceptable. 

T.  p.  1606,  Mch.  29,  1910, 


THE   ACT,    ANNOTATED  51 

from  professions,  vocations,  businesses,  trade,  commerce, 
or  sales  or  dealings  in  property,  whether  real  or  personal, 
growing  out  of  the  ownership  or  use  of  or  interest  in  real  or 
personal  property,  also  from  interest,  rent,  dividends, 
securities,  or  the  transaction  of  any  lawful  business  carried 
on  for  gain  or  profit,  or  gains  or  profits  and  income  derived 
from  any  source  whatever,  including  the  income  from  but 
not  the  value  of  property  acquired  by  gift,  bequest,  devise, 
or  descent:  Provided,  That  the  proceeds  of  life  insurance 
policies  paid  upon  the  death  of  the  person  insured  or 
payments  made  by  or  credited  to  the  insured,  on  life 
insurance,  endowment,  or  annuity  contracts,  upon  the 
return  thereof  to  the  insured  at  the  maturity  of  the  term 
mentioned  in  the  contract,  or  upon  surrender  of  the  con- 
tract, shall  not  be  included  as  income.^ 

» "Exemptions"  should  be  differentiated  from  ''deductions,"  im- 
mediately following. 

An  exemption  is  something  not  included  within  the  class  made  sub- 
ject to  taxation,  and  is,  therefore,  wholly  independent  of  the  taxing 
provisions,  and,  in  the  absence  of  specific  statutory  direction,  is  not 
to  be  included  in  the  taxpayer's  return. 

A  deduction  is  a  statutory  credit  or  allowance  permitted,  if  claimed 
by  the  taxpayer,  to  be  subtracted  from  either  the  gross  value  of  the 
taxable  object,  or  frorn  the  tax,  itself.  Unlike  an  exemption,  it  must, 
therefore,  appear  in  the  return,  as  a  partial  offset  diminishing  the 
assessable  value  of  the  whole  taxable  object  therein  shown.  Florer  v. 
Sheridan,  127  Ind.  28,  23  L.  R.  A.  278,  36  N.  E.  365;  State  v.  Smith, 
63  N.  E.  25;  Cooley,  Taxation,  3d  ed.,  270. 

General  Rtiles. 

Exemptions  are  not  made  to  favor  the  individual,  but  in  the  in- 
terest of  the  whole  people.  Being  exceptions  to  the  general  rule,  they 
are  not  favored.  The  pro\4sion  therefore  must  be  clear  and  unam- 
biguous, and  will  not  be  enlarged  by  construction,  but  will  be  strictly 
construed.  Cooley,  Taxation,  2d  ed.,  204;  Mundy  v.  Van  Hoose, 
104  Ga.  292,  37  S.  E.  783. 

Exemptions,  applicable  to  individuals,  are  declared  by  the  statute 
to  include  the  following : 

(See,  also,  pp.  87,  92.) 


52  FEDERAL   INCOME   TAX   LAW 

That  in  computing  net  income  for  the  purpose  of  the 
normal  tax  there  shall  be  allowed  as  deductions:  First, 
the  necessary  expenses  actually  paid  in  carrying  on  any 
business,  not  including  personal,  living,  or  family  ex- 
penses; second,  all  interest  paid  within  the  year  by  a 

Exemptions,  applicable  to  individuals — Continued 

(a)  The  value  of  property  acquired  by  gift,  that  is,  from  a  living 

person, 
(6)  The  value  of  property  acquired  by  bequest,  devise  or  descent, 

that  is,  through  the  testamentary  disposition  of,  or  kinship 

or  heirship  with  a  decedent. 

(c)  The  proceeds  of  a  life  insurance  policy  received  by  the  benefi- 

ciary upon  the  death  of  the  insured. 

(d)  Receipts  by  the  insured,  upon  the  maturity  or  surrender  of 
life  insurance,  endowment,  or  annuity  contracts,  of  payments 
made  by  him  or  for  his  credit. 

Unless  the  word  "proceeds"  in  this  paragraph  of  the  Act  be 
construed  to  apply  to  such  "payments,"  as  well  as  to  life  in- 
surance policies,  it  would  seem  that  any  excess  return  over 
and  above  the  amount  paid  would  not  be  exempt. 

(e)  Interest  upon  obligations  of  a  state  or  any  political  subdi\T- 

sion  thereof,  and  upon  the  obligations  of  the  United  States 
or  its  possessions  (p.  64). 

Exemption  as  to  interest  of  a  state  or  political  subdivision  thereof 
is  included  for  the  same  reason  noted  with  regard  to  the  obli- 
gations and  income  of  political  sovereignties  (p.  92),  the 
imposition  of  a  tax  upon  their  obligations  being  construed  as 
lessening  the  value  of  such  obligations,  and  a  consequent  in- 
terference with  their  sovereign  rights  and  functions. 

(/)  The  compensation  of  the  President  of  the  United  States  dur- 
ing the  term  for  which  he  has  been  elected  (p.  65). 
This  is  in  compliance  with  Art.  II,  Sec.  1,  of  the  Constitution, 
which  prohibits  an  increase  or  decrease  in  the  President's  com- 
pensation during  the  period  for  which  he  shall  have  been  elected. 

(g)  The  compensation  of  the  federal  judges  now  in  office  (p.  65). 
This  is  in  compliance  with  Art.  Ill,  Sec.  1,  of  the  Constitution, 
which  prohibits  a  diminution  of  the  compensation  of  federal 
judges  during  their  continuance  in  office. 

Qi)  The  compensation  of  all  officers  and  employes  of  a  state  or 
tiny  political  subdivision  thereof  (p.  65). 
This  exemption  is  included  for  the  same  reason  as  noted  with 
regard  to  the  exemption  of  the  obligations  and  income  of 


THE    ACT,    ANNOTATED  63 

taxable  person  on  indebtedness;  third,  all  national,  State, 
county,  school,  and  municipal  taxes  paid  within  the  year, 
not  including  those  assessed  against  local  benefits;  fourth, 
losses  actually  sustained  during  the  year,  incurred  in 

Exemptions,  applicable  to  individuals — Continued 

political  sovereignties  (p.  64, 92).    Collector  v.  Day,  78  U.  S. 
113,  78  L.  Ed.  122. 

It  does  not  extend  to  the  salaries  of  the  officers  and  employes  of 
the  District  of  Columbia,  Porto  Rico,  and  the  Philippine 
Islands  (p.  116).  Whether  it  extends  to  the  salaries  of  the 
officers  and  employes  of  the  other  territories  is  not  clear,  as 
the  statute  only  provides  that  the  word  "State"  or  "United 
States"  shall  be  construed  to  include  territories,  when  neces- 
sary to  carry  out  its  provisions. 

The  status  of  territories  is  for  many  purposes  extremely  vague. 
They  have  been  defined  as  political  subdivisions  of  the  out- 
lying dominion  of  the  United  States,  the  relation  of  which, 
to  the  general  Government,  is  much  the  same  as  that  which 
counties  bear  to  the  several  states.  None  of  them  is  in  any 
sense  a  sovereign  power,  and  even  such  quasi  sovereignty  as 
they  are  granted  is- entirely  subject  to  be  directed  or  overruled 
by  Congress.  New  Brunswick  Bank  v.  Co.  of  Yankton,  101 
U.  S.  129,  25  L.  Ed.  1046;  Snow  v,  U.  S.,  18  Wall.  317,  21 
L.  Ed.  784;  16  Op.  Atty.  Gen.  114;  38  Cyc.  196. 

There  does  not  appear  to  be,  therefore,  any  constitutional  pro- 
hibition, as  in  the  case  of  the  states,  against  the  taxation  of 
their  resources  or  administrative  expenditures,  and  it  is  not 
necessary  in  order  to  carry  out  the  provisions  of  this  Act 
that  the  exemption  should  be  construed  as  applicable  to 
them.  On  the  other  hand,  the  specific  exception  of  the  District 
of  Columbia,  the  Philippines,  and  Porto  Rico  would  indicate 
a  legislative  intent  to  extend  the  privilege  to  the  territories 
not  so  specified. 

Exemptions,  applicable  to  individuals  have  been  construed  not  to 
include  the  following: 
(See,  also,  pp.  89,  92). 

Damages  recovered  in  tort  actions.    1  I.  R.  R.  155. 
Income  of  honorably  discharged  soldiers.    11  I.  R.  R.  122. 
Property  declared  exempt  by  a  state  statute,  as  a  homestead. — 
Upon  the  ground  that  the  state  exemption  laws  are  inappli- 
cable to  debts  due  from  a  citizen  to  the  United  States.  United 
States  V.  Howell,  9  Fed.  674. 


54  FEDERAL  INCOME  TAX  LAW 

trade  or  arising  from  fires,  storms,  or  shipwreck,  and  not 
compensated  for  by  insurance  or  otherwise;  fifth,  debts 
due  to  the  taxpayer  actually  ascertained  to  be  worthless 
and  charged  off  within  the  year;  sixth,  a  reasonable 
allowance  for  the  exhaustion,  wear  and  tear  of  property 
arising  out  of  its  use  or  employment  in  the  business,  not  to 
exceed,  in  the  case  of  mines,  5  per  centum  of  the  gross  value 
at  the  mine  of  the  output  for  the  year  for  which  the  com- 
putation is  made,  but  no  deduction  shall  be  made  for 
any  amount  of  expense  of  restoring  property  or  making 
good  the  exhaustion  thereof  for  which  an  allowance  is 
or  has  been  made:  ^  Provided,  That  no  deduction  shall  be 
allowed  for  any  amount  paid  out  for  new  buildings, 
permanent  improvements,  or  betterments,  made  to  in- 
crease the  value  of  any  property  or  estate;  seventh,  the 
amount  received  as  dividends  upon  the  stock  or  from  the 
net  earnings  of  any  corporation,  joint  stock  company, 
association,  or  insurance  company  which  is  taxable  upon 
its  net  income  as  hereinafter  provided;  eighth,  the  amount 
of  income,  the  tax  upon  which  has  been  paid  or  withheld 
for  payment  at  the  source  of  the  income,  under  the  provi- 
sions of  this  section,  provided  that  whenever  the  tax  upon 
the  income  of  a  person  is  required  to  be  withheld  and  paid 
at  the  source  as  hereinafter  required,  if  such  annual  income 
does  not  exceed  the  sum  of  $3,000  or  is  not  fixed  or  certain, 
or  is  indefinite,  or  irregular  as  to  amount  or  time  of  accrual, 
the  same  shall  not  be  deducted  in  the  personal  return  of 
such  person. 

1  Deductions,  applicable  to  individuals,  are  declared  by  the  statute 
to  include  the  following: 

(See,  also,  Non-resident  aliens,  p.  56.) 

Note,  that  for  the  year,  1913,  only  five-sixths  of  the  total  amount 
of  deductions  are  to  be  made  (p.  65).  It  is  apprehended 
that  the  word,  exemptions,  here  used,  does  not  apply  to  ex- 
emptions, proper,  but  to  certain  of  those  deductions  which 
have  been  loosely  styled  exemptions  in  the  Act. 

(a)  Necessary  expenses  actually  paid  in  conducting  busmess,  ex- 
clusive of  personal,  living,  or  family  expenses. 


THE   ACT,    ANNOTATED  55 

Deductions,  applicable  to  individuals — Continued 

It  should  be  noted  that  certain  expenses  which  might  be  con- 
sidered personal  but  which  accrued  directly  in  connection  with 
the  conduct  of  business  are  deductible, 
(ft)  Interest  paid  within  the  year  on  indebtedness. 

(c)  Taxes  paid  within  the  year,  exclusive  of  assessments  for  local 

benefits. 
"National,  state,  county,  school,  and  municipal"  taxes  include, 
generally,  all  taxes  payable  by  an  individual. 
Import  duties  and  internal  revenue  taxes  are  national  excise 
taxes.    The  Treasury  Department  has  held  the  former,  and 
doubtless  would  hold  the  latter,  not  deductible  if  included  in 
figuring  the  cost  of  goods.   T.  D.,  1606,  Mch.  29, 1910. 
License  fees  being  either  excise  taxes  or  business  expenses,  are 
presumably  deductible. 

(d)  Assessments  formerly  deductible  (5  I.  R.  R.  115)  are  now 
excepted  upon  the  ground  that  they  are  balanced  by  the  im- 
provement made. 

(e)  Losses  during  the  year  incurred  in  trade  or  arising  from  fires, 

storms,  or  ship-wreck,  not  compensated  by  insurance. 
The  decisions  noted  below  as  to  what  items  are  not  properly 
deductible  as  included  in  this  class,  should  be  carefully  consid- 
ered. 

(J)  Debts  ascertained  to  be  worthless  and  charged  off  during  the 
year. 

Reasonable  discretion  is  allowed  as  to  the  determination  of 
bad  debts  although  not  technically  charged  off  to  profit  and 
loss.  United  States  v.  Frost,  9  I.  R.  R.  41;  United  States  v. 
Mayer,  Deady,  127. 

It  may  be  presumed  that  in  order  to  enjoy  the  benefit  of  this 
deduction  the  taxpayer  need  not  necessarily  keep  books  in 
which  worthless  debts  are  technically  "charged  off" — that  it 
would  be  sufficient  if  such  debts  are  determined  in  good  faith 
to  be  worthless,  are  so  specified,  and  are  deducted  in  the 
return. 

(g)  Reasonable  allowance  for  depreciation  of  property  consequent 
upon  its  use  in  business;  not  exceeding,  in  the  case  of  mines, 
five  per  cent  of  gross  value,  at  the  mine,  of  its  output  for  the 
tax  year  (T.  D.,  1606,  Mch.  29,  1910);  and  exclusive  of  out- 
lay for  new  construction  and  betterments. 
As  literally  expressed,  this  deduction  might  exclude  such  de- 
preciation as  results  to  business  property  when  standing  idle. 
Wliether  idle  or  operating,  such  property  is  employed  in 
business  and  the  addition  of  the  term  "employment"  may, 


56  FEDERAL  INCOME  TAX  LAW 

Deductions,  applicable  to  individuals — Continued 

therefore,  be  presumed  to  indicate  the  legislative  intent  to 
include  in  this  deduction  whatever  is  fairly  and  generally 
understood  as  covered  by  the  term  depreciation.  T.  D.,  1606, 
Mch.  29,  1910. 

Under  the  English  act,  an  amount  set  aside  to  cover  deprecia- 
tion of  plant,  was  held  an  addition  to  capital  and  taxable. 
Forder  v.  Handyside,  L.  R.  1  Ex.  D.  233. 
Note  the  decisions  given  below  as  to  allowance  for  construc- 
tion, betterments,  etc. 

(h)  Dividends  of  any  corporation,  association,  or  joint  stock  or 
insurance  company  taxable  upon  income  under  this  act. 
The  expression  "dividends  upon  the  stock  or  from  the  net 
earnings"  is  apparently  intended  to  include  broadly  all  divi- 
dends received  from  taxable  companies,  and  not  to  vary  any 
rules  heretofore  laid  down  by  the  courts.  It  should  be  noted 
that  the  deduction  is  not  limited  to  dividends  of  companies 
which  have  paid  the  tax,  but  includes  all  companies  "taxable." 
Partnerships  are  not  taxable,  as  such,  and  dividends  there- 
from are  not,  therefore,  deductible. 

(i)  Income  upon  which  tax  has  been  paid  or  withheld  at  the 
source. 

The  exception  following,  that  is,  the  case  where  the  annual  in- 
come does  not  exceed  tlirec  thousand  dollars,  or  is  not  fixed 
or  certain,  etc.,  is  not  an  actual  exception,  as  in  such  cases, 
the  tax  is  not  provided  to  be  paid  by  the  source  (p.  73). 

(;•)     $3,000. 

This  is  the  basic  deduction  made  for  the  purpose  of  exempt- 
ing from  the  tax  all  incomes  of  less  than  that  amount. 

(/c)  $1,000  (additional)  in  the  case  of  a  taxpayer  living  with 
non-taxable  husband  or  wife. 

This  deduction  does  not  depend  upon  whether  the  non-taxable 
husband  or  wife  is  supported  by  the  taxpayer,  the  only  pro- 
vision being  that  the  couple  live  together;  that  both  do  not 
have  taxable  incomes;  and  that  only  one  shall  be  allowed  the 
deduction. 

As  to  apportionment  between  the  husband  and  wife  in  certain 
cases,  see  1 1.  R.  R.  188. 

Non-resident  aliens: 

The  deductions  allowed  to  non-resident  aliens  are  the  same  as 
those  allowed  to  residents  (p.  54),  except  that,  as  in  the  case 
of  a  foreign  corporation  (p.  65),  the  deductible  business  ex- 
penses and  losses  are  those  incurred  in  connection  with  the 
alien's  business  or  property  in  the  United  States  (p.  79); 


THE   ACT,    ANNOTATED  57 

Deductions,  applicable  to  individuals — Continued 

the  deductible  taxes  are  United  States,  state,  or  territorial 
taxes  (p.  95);  and  the  deductible  interest  payments  are  the 
same  fraction  of  the  total  interest  payments,  as  the  income 
received  from  business  in  this  country  is  of  the  said  alien's 
total  income.  As  to  the  last  item — interest — there  may  be 
some  doubt,  because  of  the  ambiguity  of  the  provision  re- 
specting computation  of  incomes  of  aliens  of  this  class  (p.  65), 
but  the  construction  here  given  appears  to  be  the  most  just 
and  reasonable.  Judicial  construction  will  be  necessary  to 
determine  whether  this  class  are  entitled  to  the  basic  deduc- 
tron  of  $3,000  or  $4,000. 

Deductions,  applicable  to  individuals,  have  been  construed  to  in- 
clude the  following: 

(See,  also,  p.  98.) 

Alien,  resident  in  the  U.  S.,  the  same  deductions  as  those  allowed 
to  a  citizen,    6  I.  R.  R.  18. 

Assessments  upon  property  holders,  where  laid  upon  all  taxpayers 
of  municipality.    1 1.  R.  R.  150,  196. 

Betterments,  see  Repairs.  ^ 

Bad  debts,  see  Debts. 

Balance  of  cost  of  property  destroyed  by  fire  over  insurance  re- 
ceived.   5  I.  R.  R.  154. 

Children,  see  Family,  Guardian,  Step-children. 

Commission,  see  Salaries. 

Cost,  see  Balance,  Repairs,  Salaries,  Wages,  Rent. 

Cost  of  animals,  purchased,  lost  by  death.    3  I.  R.  R.  100. 

Cost  of  articles,  manufactured  or  in  process  of  manufacture,  in- 
cluding cost  of  materials,  labor,  etc.  T.  D.,  1606,  Mch.  29, 
1910. 

Cost  of  commutation  tickets  necessary  for  business.  111.  R.  R. 
172. 

Cost  of  fertilizers,  purchased.    7  I.  R.  R.  58. 

Cost  of  labor,  to  nursery  companies,  for  care  of  stock.  T.  D., 
1606,  Mch.  29, 1910. 

Cost  of  litigation.    7  I.  R.  R.  59. 

Cost,  pro  rata  part  of,  upon  sale  of  fractional  part  of  patent  right. 
1  I.  R.  R.  188. 

Cost  of  salesmen,  to  nursery  companies.  T.  D.,  1606,  Mch.  29, 
1910. 

Cost  of  seed  purchased  for  planting.    7  I.  R.  R.  58. 

Cost  of  seedlings  to  nursery  companies.  T.  D.,  1606,  Mch.  29, 
1910. 

Cost  of  slaves'  clothing  and  subsistence,  to  planter.  Boutwell 
(1863),  275. 


I 
58  FEDERAL   INCOME   TAX   LAW 

Deductions,  Applicable  to  individuals — Continued 

Cost  of  goods,  in  estimating  value  or  market  value  upon  annual 

inventory  and  balance.    7  I.  R.  R.  59. 
Debts,  see  Loss. 
Debts,  believed  to  be  good  in  one  year,  but  found  worthless  the 

following  year,  deductible  in  the  latter.    5  I.  R.  R.  123. 
Debts,  bad  or  worthless,  or  such  as  appear  so  to  be  at  the  end  of 

the  year.    United  States  v.  Mayer,  Deady,  127;  7  I.  R.  R.  60; 

Fed.  Cas.  15753. 
Depreciation  in  value  of  patents  expiring  during  year.    1  I.  R.  R. 

188. 
Depreciation,  of  stock,  to  a  reasonable  amount.    T.  D.,  1606, 

Mch.  29,  1910. 
Depreciation,  in  value  of  real  estate,  pro  rata  of.    T.  D.  1606, 

Mch.  29,  1910. 
Dividends  paid  to  employes  in  lieu  of  wages.    T.  D.,  1606,  Mch. 

29,  1910. 
Dividends  on  stock  of  foreign  corporations.    T.  D.,  1606,  Mch.  29, 

1910. 
Estimated  depreciations  of  value  of  property.   5 1.  R.  R.  154. 
Excise  penalties,  see  Penalties. 
Expenditure,  see  Labor,  Repairs. 
Expenses  of  conveyances  necessarily  used  in  business  traveling. 

7  I.  R.  R.  60. 
Expenses  of  distribution  of  profits  by  trustee.    Aiken  v.  Trustees 

(1896),  W.  N.  (Eng.)  Part  1,  120. 
Expense  of  cultivating  farm  leased  upon  rent  to  be  paid  in  produce. 

7  I.  R.  R.  60. 
Expenses  of  keeping  horse  for  business  purposes.    7  I.  R.  R.  59. 
Expenses  of  sinking  oil  wells,  where  the  business  is  the  production 

and  sale  of  oil.    11 1.  R.  R.  R.  123. 
Family  consisting  of  mother  and  minor  children  entitled  to  but 

one  statutory  deduction.    11 1.  R.  R.  89. 
Family— Definition  of.    1  L  R.  R.  171. 
Fire,  see  Repairs. 
Husband,  pro  rata  share  of  statutory  deduction  where  wife  has 

legal  control  of  her  own  house,  even  though  living  separate, 

unless  legally  separated.    2  L  R.  R.  61;  7  I.  R.  R.  59. 
Fruitgrowers,  see  Horticultural. 
Guardians,  see  Minors. 

Guardians  of  minor  children  entitled  to  pro  rata  statutory  deduc- 
tion for  each  ward.    1 1 1.  R.  R.  89. 
Insurance  paid  by  tenant  as  part  of  rent.    7  I.  R.  R.  59. 
Insiurauce  paid  by  landlord  on  leased  building.    5  I.  R.  R.  123. 


THE   ACT,    ANNOTATED  59 

Deductions,  applicable  to  individuals — Continued 

Insurance  on  property,  whether  productive  or  not.    1 1.  R.  R.  149. 
Interest  paid  on  time  deposits  and  deposits  subject  to  check. 

L.  R.  App.  Cas.  1912;  Farmer  v.  Scottish  North  American 

Trust  Co.,  L.  R.  App.  Cas.  1912,  118;  T.  D.,  1606,  Mch.  29, 

1910. 
Interest  on  mortgage,  whether  property  productive  or  not.     1 

I.  R.  R.  149. 
Interest  on  homestead  mortgage  given  to  raise  money  invested  in 

business  from  which  income  is  derived.    11  I.  R.  R.  89,  97. 
Interest  on  mortgage  paid  by  rental  of  premises  to  mortgagee. 

11  I.  R.  R.  89,  97. 
Interest,  pro  rata  part  of,  paid  during  year  on  notes  given  prior 

thereto.   T.  D.,  1606,  Mch.  29, 1910. 
Labor,  see  Cost,  Wages. 
Labor,  expense  on  farm  in  year  when  no  crop  is  sold,  deductible 

from  income  of  any  business.    4  I.  R.  R.  12. 
Litigation,  see  Cost. 
Loss  in  business  of  same  nature.    1  I.  R.  R.  149,  154;  11 1.  R.  R. 

105. 
Losses,  only  when  ascertained  and  settled  during  tax  period. 

5  I.  R.  R.  74. 
Loss  on  account  of  payment  made  as  surety. — On  ground  that  loss 

is  a  bad  debt  uncollectible  from  principal.    9  I.  R.  R.  121. 
Loss  of  stock  rendered  worthless  by  failure  of  corporation.     2 

I.  R.  R.  5;  11 1.  R.  R.  105. 
Loss  b}'^  sale  of  stocks  deductible  in  year  of  sale.    5  I.  R.  R.  115; 

7  I.  R.  R.  59. 
Loss  on  sale  of  stocks  bought  for  investment  and  sold  to  change 

investment,  may  be  charged  against  annual  receipts  from 

dividends,  but  not  if  stock  was  bought  for  speculation.    In 

latter  case,  loss  may  be  charged  against  profit  on  sales  m 

same  year.    1 1.  R.  R.  196. 
Loss  on  sale  of  real  estate.    7  I.  R.  R.  60. 
Market  value,  see  Cost. 
Minors,  see  Guardians. 

Minors,  rule  as  to  deductions  by  guardians  of.    11  I.  R.  R.  153. 
Mother,  see  Family. 

Parents-in-law  treated  as  parents.    1 1.  R.  R.  156. 
Profit  used  for  restoration  of  income  producing  property  destroyed 

by  fire.   2  L  R.  R.  36. 
Profits  set  aside  to  maintain  property  at  average  value,  etc.    8 

I.  R.  R.  19. 
Patent  rights,  see  Cost,  Depreciation. 


60  FEDERAL  INCOME  TAX  LAW 

t 

Deductions,  applicable  to  individuals — Continued 

Penalties  imposed  for  violation  of  excise  laws  deductible  from 

income  from  business  in  which  incurred.    4  I.  R.  R.  46. 
Real  estate,  see  Loss. 

Real  estate — Pro  rata  share  of  decrease  in  value  of  real  estate,  ac- 
quired in  some  prior  year  and  sold,  or  held  for  sale,  where 

exact  decrease  for  year  cannot  be  estimated.    T.  D.,  1606, 

Mch.  29,  1910. 
Rent,  see  Insurance,  Taxes. 

Rent,  difference  between  rent  paid  and  rent  received.  7 1.  R.  R.  60. 
Repairs,  see  Cost,  Profits. 
Repairs  on  homestead.    1  I.  R.  R.  154. 
Repairs  to  rails  or  machinery  not  resulting  in  increase  of  original 

value  of  repaired  article.    2  I.  R.  R.  61. 
Repairs,  such  as  laying  new  floor,  putting  on  new  roof,  etc.,  if  not 

a  substitution  of  superior  for  inferior  article.    11 1.  R.  R.  50. 
Repairs  for  purpose  and  with  result  of  maintaining  property  at 

average  value  at  beginning  of  period.   8 1.  R.  R.  19. 
Repairs,  irrespective  of  productive  nature  of  property.    1 1.  R.  R. 

156. 
Salaries  of  agents  necessarily  employed  to  care  for  real  estate. 

3  I.  R.  R.  102. 
iSalaries  of  salesmen  of  nursery  companies.    T.  D.,  1606,  Mch.  29, 

1910. 
Salaries  paid  to  salesmen  in  form  of  commissions.    T.  D.,  1606, 

Mch.  29,  1910. 
Silent  partner,  rule  as  to  losses  of.   4 1.  R.  R.  46. 
Step-children  treated  as  children.    1  I.  R.  R.  156. 
Taxes  upon  property  whether  productive  or  not.    1  I.  R.  R.  149; 

11  I.  R.  R.  98. 
Taxes  in  the  year  in  which  they  are  paid.    7  I.  R.  R.  60;  T.  D., 

1606,  Mch.  29,  1910. 
Taxes  paid  upon  a  homestead.    11  I.  R.  R.  89. 
Taxes  paid  upon  property  occupied  by  the  owner.    1 1.  R.  R.  155. 
Wages  of  house-servants  employed  in  productive  labor,  as  making 

butter  for  sale.    7  I.  R.  R.  58. 
Wife  having  separate  income  entitled  to  pro  rata  share  of  statutory 

deduction,  even  though  living  apart  from  husband,  unless 

legally  separated.    2 1.  R.  R.  61 ;  7  I.  R.  R.  59. 

Deductions,  applicable  to  individuals,  have  been  construed  not 
to  include  the  following: 

(See,  also,  p.  101.) 
Animals,  see  Value.. 


THE   ACT,    ANNOTATED  61 

Deductions,  applicable  to  individuals — Continued 

Assessments,  laid  upon  owners  of  property  increased  in  value  by 

improvements.    1  I.  R.  R.  150. 
Betterments,  see  Repairs. 
Bonds,  see  Premium. 
Bonus,  see  Lease,  Premium. 
Bonus  paid  for  loan  not  deductible  as  an  expense  of  operation. 

Arizona  Copper  Co.  v.  Surveyor,  1896,  N.  W.  (Eng.),  Part  I, 

93. 
Business,  see  Purchase  Price. 
Construction,  see  Improvements. 
Corporations,  see  Loss. 
Debts  paid  out  of  income.    7  L  R.  R.  59. 
Depreciation,  estimated.    5  I.  R.  R.  154. 
Depreciation  in  value  of  lease.    2  I.  R.  R.  92. 
Depreciation  in  value  of  stocks  unsold.    3  I.  R.  R.  109;  7  I.  R. 

R.  59. 
Depreciation  in  value  of  vessel  unsold.    3  I.  R.  R.  151. 
Depreciation  in  value  of  vessel  becoming  obsolete.    Burnley  Co. 

V.  Aiken  (1896),  W.  N.  (Eng.)  Part  1, 115. 
Dividends  of  non-taxable  corporations.     T.  D.,  1857,  June  9, 

1913. 
Dividends,  payable  by  corporation  "tax  free,"  tax  upon,  not  de- 
ductible by  stockholder  unless  paid  by  corporation.     1  L 

R.  R.  153. 
Duties,  see  Taxes. 
Earnings,  see  Repairs. 
Expenses,  see  Gifts,  Improvements,  Labor,  Living  Expenses, 

Pensions,  etc. 
Expenses,  not  specified  and  of  doubtful  legality.    1 1.  R.  R.  100. 
Expenses,  business,  of  prior  years.    Broughton  Coal  Co.  v.  Kirk- 

patrick,  L.  R.  14  Q.  B.  D.  491. 
Expenses  of  farming  or  gardening  for  recreation.    7  I.  R.  R.  60. 
Expenses  for  fuel.    1  I.  R.  R.  100. 
Expenses,  ordinary  family.    7  I.  R.  R.  59. 
Expenses  of  sinking  new  mine  pits.    Coltness  Iron  Co.  v.  Black, 

L.  R.  6  App.  Cas.  315. 
Expenses  of  sinking  oil  wells  by  persons  engaged  in  sale  of  wells. 

11  I.  R.  R.  123. 
Expenses  for  army  substitute.    2  I.  R.  R.  92. 
Farmers,  see  Funds. 
Farming,  see  Labor. 

Fertilizers,  cost  of,  produced  on  farm.    7  L  R.  R.  58, 
Fuel,  see  Expenses. 


62  FEDERAL   INCOMiS   TAX   LAW 

Deductions,  applicable  to  individuals — Continued 

Funds,  see  Insurance. 

Gifts.    71.  R.  R.  59. 

Gifts  made  to  employes.    T.  D.,  1606,  Mch.  29,  1910. 

Good  will,  see  Purchase  Price. 

Hotel  bills,  see  Living  Expenses. 

Import  duties,  see  Taxes. 

Insurance.    5  I.  R.  R.  115. 

Improvements,  see  Repairs. 

Improvements  to  property.  1  I.  R.  R.  180;  5  I.  R.  R.  130;  8 
I.  R.  R.  19;  T.  D.,  1606,  Mch.  29,  1910. 

Improvements  to  new  land  by  ditching,  etc.  7  I.  R.  R.  58;  Corars. 
V.  Antill,  1902,  App.  Cas.  422. 

Insurance,  fund  set  aside  for  self-insurance.  T.  D.,  1606,  Mch. 
29,  1910. 

Interest  accruing  prior  to  tax  year.    T.  D.,  1606,  Mch.  29,  1910. 

Interest  on  purchase  money  mortgage.    11 1.  R.  R.  89,  97. 

Interest  payment,  guaranteed  pending  construction  of  works 
through  stockholders  of  other  companies.  City,  etc.,  Corp. 
».  Styles,  4  Times  L.  R.  51. 

Interest  nominally  falling  due  in  tax  year,  payment  of  which  can- 
not be  compelled.    7  I.  R.  R.  59. 

Interest  on  notes  given  in  current  tax  year  but  payable  in  subse- 
quent year.    T.  D.,  1606,  Mch.  29,  1910. 

Investments  in  business.    7  I.  R.  R.  60. 

Judgment  in  tort  action.    1 1.  R.  R.  155. 

Labor,  see  Wages. 

Labor,  expense  of  in  one  year  not  deductible  from  profits  of  crop 
in  subsequent  year.    4  I.  R.  R.  12;  6  I.  R.  R.  3. 

Ijabor,  value  of  labor  performed  by  farmer's  minor  children.    7 

I.  R.  R.  58. 

Labor,  value  of  inventor's  time  and  labor  not  deductible  from 
profit  of  sale  of  patent  right.    1 1.  R.  R.  188. 

Labor,  value  of  proprietor's.    1 1.  R.  R.  156. 

Labor,  expense  of  farm  labor  in  year  when  no  crop  was  sold  not 
deductible  from  rent,  dividends,  etc.    4  I.  R.  R.  12. 

Lease,  see  Depreciation,  Premium. 

Living  expenses.   7  I.  R.  R.  60. 

Loan,  see  Bonus. 

Losses  since  end  of  tax  year.  U.  S.  Int.  Rev.  Dec.  No.  110,  May. 
1863,  1  L  R.  R.  181;  2  L  R.  R.  68. 

Losses  in  one  business  not  deductible  from  profit  in  another. 

I I.  R.  R.  119,  196. 

Losses  in  one  branch  of  business  not  deductible  from  income  of 


THE    ACT,    ANNOTATED  63 

Deductions,  applicable  to  individuals — Continued 

another  distinct  branch.    Religious  Tract  Society  v.  Forbes 

(1896),  W.  N.  (Eng.),  Part  1,  126. 
Losses  by  robbery.    5  I.  R.  R.  123;  7  I.  R.  R.  60. 
Losses  through  suretyship.    5  L  R.  R.  123. 
Losses  on  sale  of  stock  purchased  for  speculation  not  deductible 

from  dividends.    1  L  R.  R.  196. 
Losses  of  stock  company,  though  non-taxable,  in  which  individual 

is  interested.    5 1.  R.  R.  148. 
Losses  through  speculation.    1  I.  R.  R.  154. 
Loss  of  income  of  former  year,  except  occasioned  by  use  in  business 

in  current  tax  year.   4 1.  R.  R.  46. 
Loss  of  moneys  invested  in  stock-holding  companies.    4  I.  R.  R. 

46. 
Mining,  see  Expenses,  Value. 
Ore,  see  Value. 

Pensions  paid  to  employes.    T.  D.,  1606,  Mch.  29,  1910. 
Premium  paid  for  lease.    Gillett  v.  Colquhoun,  33  Weekly  Rep. 

(Eng.)  258. 
Premium  paid  upon  U.  S.  bonds.   5  L  R.  R.  74. 
Produce,  see  Rent. 
Profits  of  manufacturer  because  of  prior  payment  of  excise  tax. 

U.  S.  Int.  Rev.  Dec.  No.  110,  May,  1863. 
Purchase  price  of  good  will  of  business.    7  I.  R.  R.  60. 
Purchase  price  of  a  business,  paid  out  of  income.    City,  etc.,  Cor- 
poration V.  Styles,  4  T.  L.  R.  51. 
Purchase  price  of  certain  rights  paid  by  branch  office  in  foreign 

country.    London  Bank  v.  Apthorpe,  1891,  L.  R.  2  Q.  B.  D. 

378. 
Rent,  where  tenant's  own  house  is  left  unoccupied,  or  occupied  by 

another,  rent  free.    4  I.  R.  R.  46. 
Rent  paid  in  produce.    7  I.  R.  R.  60. 
Rent  of  prior  years.    Broughton  Coal  Co.  v.  Kirkpatrick,  L.  R. 

14  Q.  B.  D.  491. 
Rental  value  of  land  held  under  Crown  lease  and  tax  exempt. 

Comrs.  V.  Antill,  1902,  A.  C.  422. 
Rental  value  of  property  occupied  by  owner.    1 1.  R.  R.  171. 
Repairs,  see  Improvements. 

Repairs  giving  permanent  additional  value.    5  I.  R.  R.  130. 
Repairs  amounting  to  betterments.    T.  D.,  1606,  Mch.  29,  1910. 
Repairs  of  injuries  to  building,  which  occurred  prior  to  purchase. 

2 1.  R.  R.  61;  6  I.  R.  R.  18;  7  I.  R.  R.  60;  11 1.  R.  R.  50,  73. 
Repairs  by  substitution  of  higher  priced  or  superior  article.    2 

I.  R.  R.  61;  11  I.  R.  R.  50;  Boutwell,  306. 


64  FEDERAL  INCOME  TAX  LAW 

The  net  income  from  property  owned  and  business 
carried  on  in  the  United  States  ^  by  persons  residing  else- 
where ^  shall  be  computed  upon  the  basis  prescribed  in  this 
paragraph  and  that  part  of  paragraph  G  of  this  section 
relating  to  the  computation  of  the  net  income  of  corpora- 
tions, joint-stock  and  insurance  companies,  organized, 
created,  or  existing  imder  the  laws  of  foreign  countries, 
in  so  far  as  applicable. 

That  in  computing  net  income  under  this  section  there 
shall  be  excluded  the  interest  upon  the  obligations  of  a 
State  or  any  political  subdivision  thereof,  and  upon  the 

Deductions,  applicable  to  individuals — Continued 

Salaries,  when  deemed  excessive.    T,  D.,  1606,  Mch.  29,  1910. 

Speculation,  see  Losses. 

Substitute,  see  Expenses. 

Taxes  or  import  duties  if  included  in  estimating  cost  of  goods. 

T.  D.,  1606,  Mch.  29,  1910. 
Taxes  accruing  prior    to    tax    year.     T.   D.,    1606,   Mch.   29, 

1910. 
Taxes  deducted    from    income  of    previous  year.     1   I.   R.   R. 

181. 
Taxes  not  actually  paid  at  end  of  tax  year.    7  I.  R.  R.  60. 
Taxes  on  stocks  not  taxable  by  municipalities,  but  by  state,  etc. 

II.  R.  R.  181;cp.  lOI.R.  R.9. 
Taxes,  federal  legacy  and  succession,  rule  as  to.    7  I.  R.  R.  59. 
Timber,  see  Value. 
Value,  see  Depreciation. 
Value  of  animals  raised  by  farmer,  lost  by  death.    3  I.  R.  R. 

100. 
Value  of  ore  extracted  from  mine.    T.   D.,   1796,   Sept.    13, 

1912. 
Value  of  timber  removed  from  timber  lands.    T.  D.,  1606,  Mch. 

29,  1910. 
Wages  of  farmer's  adult  children  working  for  him.    7  I.  R.  R, 

58. 
Wages  of  officer's  servant.    1  I.  R.  R.  100. 
Wages  for  production  of  articles  consumed  in  family.    7  I.  R.  R, 

58. 
Wages  for  unproductive  labor.    7  I.  R.  R.  58. 

*  See  Doing  Business,  p.  43. 

*  See  Non-resident  aliens,  p.  23,  42,  44,  56. 


THE   ACT,    ANNOTATED  65 

obligations  of  the  United  States  or  its  possessions;  also 
the  compensation  of  the  present  President  of  the  United 
States  during  the  term  for  which  he  has  been  elected,  and 
of  the  judges  of  the  supreme  and  inferior  courts  of  the 
United  States  now  in  office,  and  the  compensation  of  all 
officers  and  employees  of  a  State  or  any  political  subdivi- 
sion thereof  ^  except  when  such  compensation  is  paid  by 
the  United  States  Government. 

C.  That  there  shall  be  deducted  from  the  amount  of  the 
net  income  of  each  of  said  persons,  ascertained  as  provided 
herein,  the  sum  of  $3,000,  plus  $1,000  additional  if  the 
person  making  the  return  be  a  married  man  with  a  wife 
living  with  him,  or  plus  the  sum  of  $1,000  additional  if  the 
person  making  the  return  be  a  married  woman  with  a 
husband  living  with  her;  but  in  no  event  shall  this  addi- 
tional exemption  of  $1,000  be  deducted  by  both  a  husband 
and  a  wife:  Provided,  That  only  one  deduction  of  $4,000 
shall  be  made  from  the  aggregate  income  of  both  husband 
and  wife  when  living  together.^ 

D.  The  said  tax  shall  be  computed  upon  the  remainder 
of  said  net  income  of  each  person  subject  thereto,  accruing 
during  each  preceding  calendar  year  ending  December 
thirty-first:  Provided,  however.  That  for  the  year  ending 
December  thirty-first,  nineteen  hundred  and  thirteen, 
said  tax  shall  be  computed  on  the  net  income  accruing 
from  March  first  to  December  thirty-first,  nineteen  hun- 
dred and  thirteen,  both  dates  inclusive,  after  deducting 
five-sixths  only  of  the  specific  exemptions  and  deductions 
herein  provided  for. 

On  or  before  the  first  day  of  March,  nineteen  hundred 
and  fourteen,  and  the  first  day  of  March  in  each  year 
thereafter,  a  true  and  accurate  return,  under  oath  or 
affirmation,  shall  be  made  by  each  person  of  lawful  age, 
except  as  hereinafter  provided,  subject  to  the  tax  imposed 
by  this  section,  and  having  a  net  income  of  $3,000  or  over 
the  taxable  year,  to  the  collector  of  internal  revenue  for  the 

'  See  Exemptions,  p.  52.  ^  gge  Deductions,  p.  54. 


66  FEDERAL   INCOME   TAX   LAW 

district  in  which  such  person  resides  or  has  his  principal 
place  of  business,  or,  in  the  case  of  a  person  residing  in  a 
foreign  country,  in  the  place  where  his  principal  business 
is  carried  on  within  the  United  States,  in  such  form 
as  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  shall  prescribe, 
setting  forth  specifically  the  gross  amount  of  income  from 
all  separate  sources  and  from  the  total  thereof,  deducting 
the  aggregate  items  or  expenses  and  allowance  herein 
authorized;  guardians,  trustees,  executors,  administrators, 
agents,  receivers,  conservators,  and  all  persons,  corpora- 
tions, or  associations  acting  in  any  fiduciary  capacity, 
shall  make  and  render  a  i"eturn  of  the  net  income  of  the 
person  for  whom  they  act,  subject  to  this  tax,  coming  into 
their  custody  or  control  and  management,  and  be  subject 
to  all  the  provisions  of  this  section  which  apply  to  in- 
dividuals: ^  Provided,  That  a  return  made  by  one  of  two 
or  more  joint  guardians,  trustees,  executors,  administra- 
tors, agents,  receivers,  and  conservators,  or  other  persons 
acting  in  a  fiduciary  capacity,  filed  in  the  district  where 
such  person  resides,  or  in  the  district  where  the  will  or 
other  instrument  under  which  he  acts  is  recorded,  under 
such  regulations  as  the  Secretary  of  the  Treasury  may 
prescribe,  shall  be  a  sufficient  compliance  with  the  re- 
quirements of  this  paragraph;  and  also  all  persons,  firms, 
companies,  copartnerships,  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies,  except  as 
hereinafter  provided,  in  whatever  capacity  acting,  having 
the  control,  receipt,  disposal,  or  payment  of  fixed  or 
determinable  annual  or  periodical  gains;  profits,  and  in- 
come of  another  person,  subject  to  tax,  shall  in  behalf  of 
such  person  deduct  and  withhold  from  the  payment  an 
amount  equivalent  to  the  normal  income  tax  upon  the 
same  and  make  and  render  a  return,  as  aforesaid,  but 
separate  and  distinct,  of  the  portion  of  the  income  of 
each  person  from  which  the  normal  tax  has  been  thus 
1  See  Return,  p.  47. 


THE   ACT,    ANNOTATED  67 

withheld,  and  containing  also  the  name  and  address  of 
such  person  or  stating  that  the  name  and  address  or  the 
address,  as  the  case  may  be,  are  unknown :  Provided,  That 
the  provision  requiring  the  normal  tax  of  individuals  to  be 
withheld  at  the  source  of  the  income  shall  not  be  construed 
to  require  any  of  such  tax  to  be  withheld  prior  to  the  first 
day  of  November,  1913:  Provided,  further,  That  in  either 
case  above  mentioned  no  return  of  income  not  exceeding 
$3,000  shall  be  required :  Provided  further.  That  any  persons 
carrying  on  business  in  partnership  shall  be  liable  for 
income  tax  only  in  their  individual  capacity,  and  the 
share  of  the  profits  of  a  partnership  to  which  any  taxable 
partner  would  be  entitled  if  the  same  were  divided, 
whether  divided  or  otherwise,  shall  be  returned  for  taxa- 
tion and  the  tax  paid,  under  the  provisions  of  this  section, 
and  any  such  firm,  when  requested  by  the  Commissioner 
of  Internal  Revenue,  or  any  district  collector,  shall  for- 
ward to  him  a  correct  statement  of  such  profits  and  the 
names  of  the  individuals  who  would  be  entitled  to  the 
same,  if  distributed:  ^  Provided  further ,  That  persons  liable 

1  Return,  as  applicable  to  representatives  and  "  source  " — Statutory 
provisions. 

(See,  also,  pp.  46,  102). 

The  act  provides  for  return  to  be  made  in  behalf  of  another,  by 
two  classes,  of  individuals,  firms,  and  corporations.  While 
the  act  does  not  sharply  distinguish  these  classes,  it  is  evident 
that  the  first  is  intended  to  include  representatives  acting  in 
an  official  or  fiduciary  capacity  (p.  66);  the  second,  those 
chargeable  with  the  funds  of  another,  by  reason  of  temporary 
custodianship,  indebtedness,  or  other  business  relations 
(p.  73). 

A  representative  return  and  application  for  exemption,  may  also 
be  made  for  a  minor,  lunatic,  absentee,  or  one  seriously  ill, 
by  the  person  required  to  withhold  and  pay  the  tax  (p.  75). 
There  is  no  provision  for  such  return  in  case  the  taxpayer 
alone  is  responsible. 

Statutory  requirements  as  to  filing  representative  returns  are 
shown  by  the  following  table : 

Time:  On  or  before  March  1st  of  each  year,  beginning  with  the 


68  FEDERAL   INCOME   TAX   LAW 

for  the  normal  income  tax  only,  on  their  own  account  or  in 
behalf  of  another,  shall  not  be  required  to  make  return 

Return,  as  applicable  to  representatives — Continued 

year  1914  (p.  65).  This  date  is  probably  unaffected  by  the 
provision  allowing  a  corporation  to  make  a  return  sixty  days 
after  the  date  designated  by  it  as  the  end  of  its  fiscal  year 
(p.  103),  the  latter  provision  being,  in  terms,  applicable  to  the 
return  of  the  corporation's  own  income. 

Place:  Office  of  Collector  of  Internal  Revenue  for  the  district  of 
principal's  residence,  or  the  district  where  the  will,  or  other 
instrument  under  which  representative  acts,  is  recorded. 

Period  covered:  Preceding  year,  ending  December  31st. 

By  whom  made,  verified,  and  filed: 

(a)  By  a  representative: 

An  unconditional  duty  is  imposed  to  make  return  of  the  princi- 
pal's taxable  net  income  coming  into  the  custody  or  control 
and  management  of  representatives  of  this  class.  While  the 
act  provides  that  they  are  subject  to  the  provisions  of  this 
section,  which  apply  to  individuals  (p.  66),  and  that  no  re- 
turn of  income  not  exceeding  $3,000  shall  be  required,  it 
does  not  specify  whether  this  income,  upon  wliich  the  neces- 
sity of  return  is  based,  is  the  total  income  receivable  by  prin- 
cipal and  representative,  or  that  receivable  by  representar 
tive  only. 

This  ambiguity,  and  the  personal  liability  for  the  tax  by  a  repre- 
sentative responsible  for  return  (p.  74),  suggests  the  wis- 
dom of  a  representative  return  in  all  cases. 

In  case  of  two  or  more  joint  representatives,  return  may  be  made 
by  either.  In  case  the  representative  is  an  association  or 
corporation,  the  return  must,  undoubtedly,  be  made  and  veri- 
fied by  its  president,  vice-president,  or  other  principal  officer, 
and  treasurer  or  assistant  treasurer,  as  in  the  case  of  corporate 
returns  (p.  103). 

(6)  By  the  source: 
A  return  must  be  made  by  any  representative  of  this  class  having 
the  control,  receipt,  disposal,  or  payment  of  fixed  or  determin- 
able annual  [or  periodical]  gains,  profits,  and  income  of  an- 


THE   ACT,    ANNOTATED  69 

of  the  income  derived  from  dividends  on  the  capital  stock 
or  from  the  net  earnings  of  corporations,  joint-stock  com- 

Return,  as  applicable  to  representatives — Continued 

other  person  subject  to  tax.    This  applies  only  to  return  for 
normal  tax  (p.  66,  op.  75). 

Note  that  the  tax  upon  the  following  income  is  to  be  withheld  and 
paid  (and  return  thereof  made)  by  the  source,  irrespective  of 
the  amount  of  such  income,  imless  exempted  by  the  filing, 
by  the  taxpayer,  of  the  statutory  statement  and  claim  of 
exemption : — 

Interest  upon  bonds,  mortgages,  deeds  of  trust,  and  other  obliga- 
tions of  corporations,  joint  stock  companies,  associations, 
and  insurance  companies: 

Coupons,  checks,  bills  of  exchange  in  payment  of  interest  upon 
bonds  of  foreign  countries,  foreign  mortgages,  and  like  obliga- 
tions not  payable  in  United  States: 

Coupons,  checks  and  bills  of  exchange  in  payment  of  dividends 
upon  stock,  or  interest  upon  obhgations  of  foreign  corpora- 
tions, associations,  and  insurance  companies  engaged  in 
business  in  foreign  countries  (p.  75) . 

This  class  not  only  includes  both  those  who,  as  representatives, 
are  in  possession  and  control  of  the  particular  kind  of  income 
specified  by  the  act,  but  as  well,  all  those  who  are  charged 
with  the  payment  to  another  of  any  income  of  that  character, 
as,  for  example,  mortgagors,  obligors  upon  bonds,  tenants  and 
employers  (p.  73). 

The  importance  of  a  correct  construction  of  this  provision  lies 
in  the  fact  that,  coupled  with  the  duty  to  make  a  return,  is 
liability  for  the  tax  assessable  thereon. 

The  term,  "fixed  or  determinable  annual  or  periodical  gains,  prof- 
its, and  income,"  will  probably  be  found  more  difficult  of  def- 
inition that  any  other  clause  of  the  act. 

Note  that  the  words  "or  periodical"  are  used  on  page  66,  but 
not  on  pages  73,  75. 

At  the  end  of  any  year,  or  other  period,  all  income  accrued  during 
such  term,  will  have  become  fixed  and  determinable,  and  may 
be  said,  with  respect  to  such  term,  to  be  "  annual "  or  "  pe- 
riodical," as  the  case  may  be.  The  only  income  subject  to 
the  tax,  however,  is  the  net  income  of  an  entire  tax  year, 
the  amount  or  even  probable  existence  of  which  can  rarely 
be  ascertained  before  the  expiration  of  that  period,  as  gross 
income  from  whatever  source — investment,  business,  or 
speculation,  and  of  whatever  amount — may  at  that  time, 


70  FEDERAL  INCOME  TAX  LAW 

panies  or  associations,  and  insurance  companies  taxable 
upon  their  net  income  as  hereinafter  provided. 

Return,  as  applicable  to  representatives — Continued 

be  balanced  by  losses.  Payments  by  the  source  will,  on  the 
other  hand,  frequently  become  due  long  before  the  termina- 
tion of  the  tax  period,  as,  for  example,  weekly  or  monthly 
wages,  collections  payable  quarterly,  or  interest  creditable  to 
account  when  received. 

Literal  compliance  by  the  source  with  this  provision  of  the  act  will, 
accordingly,  often  result  in  depriving  the  creditor  or  owner, 
for  a  considerable  time,  of  the  use  of  a  fund  which  will  finally 
be  found  not  subject  to  the  tax,  yet  a  default  in  such  com- 
pliance may  result  in  liability  to  payment  of  the  tax  by  the 
source. 

The  act  does  not  afford  any  ad  interim  protection  to  the  creditor 
or  owner  of  the  income,  as  an  affidavit  and  statement  of 
exemption  (p.  74),  or  application  to  the  collector  (p.  74)  can 
obviously  not  be  made  until  the  expiration  of  the  tax  year. 


Exceptions: 

Representative  return  (by  the  source)  is  not  required  to  be  made 
by  the  following: 

(a)  A  partnership,  while  not  required  to  make  return,  is  re- 
quired, upon  request  of  the  Commissioner  of  Internal  Rev- 
enue or  any  district  collector,  to  forward  to  him  a  correct 
statement  of  the  profits  and  names  of  the  individuals  consti- 
tuting the  partnership,  who  would  be  entitled  to  such  profits 
if  distributed  (p.  67).    See,  also,  p.  72. 

(b)  Any  corporation  required  by  the  commissioner  must  for- 
ward to  him  a  correct  statement  of  accumulated  profits,  and 
the  names  of  the  individuals  entitled  to  the  same,  if  dis- 
tributed (p.  50). 


THE   ACT,    ANNOTATED  71 

Any  person  for  whom  return  has  been  made  and  the 
tax  paid,  or  to  be  paid  as  aforesaid,  shall  not  be  required 

Return,  as  applicable  to  representatives — Continued 

Contents  of  return. 

(a)  Return  by  representative. 

A  statement  of  the  taxable  net  income,  of  the  principal,  coming 
into  the  custody  or  control  of  the  representative.  This  return 
is  subject  to  all  the  provisions  which  apply  to  individual  re- 
turns (p.  66)  and  hence,  should  include  the  same  items  and 
totals  (p.  66). 

K  made  for  a  minor,  lunatic,  absentee  from  the  United  States,  or 
invalid,  it  may  be  mad^  as  a  complete  substitute  for  the  in- 
dividual retmn  by  the  principal  and  contain  a  full  statement 
of  his  whole  taxable  net  income,  application  for  deductions, 
exemptions,  etc.,  provided  it  be  accompanied  by  an  affidavit 
of  the  sufficiency  of  the  representative's  knowledge  (p.  75). 
(&)  Return  by  source. 

A  statement  of  the  portion  of  the  income  of  the  principal  or  cred- 
itor from  which  the  normal  tax  has  been  withheld;  and  tlie 
name  and  address  of  the  principal  or  creditor,  or  a  statement 
that  the  name  and  address,  or  address,  are  unknown. 

(c)  Return  by  tenant. 

A  statement  of  the  gross  rental  and  deductions  for  taxes,  assess- 
ments, and  cost  of  maintenance,  repairs  and  insurance. 

(d)  Return  by  partnership,  see  Exception  (c3 

Return,  as  applicable  to  representatives  and  source — Construction. 

(See,  also,  pp.  49,  110). 

Administrators,  see  Decedents. 

Agents,  see  Aliens. 

Aliens'  agents  or  partners  may  make  return  if  possessed  of  suffi- 
cient knowledge.    7  I.  R.  R.  10. 

Children,  see  Step-children. 

Decedent's  income  prior  to  death  returnable  by  personal  repre- 
sentative.   Mandell  v.  Pierce,  3  Cliff.  134;  7  I.  R.  R.  59. 

Decedent's  income  not  returnable  when  death  occurred  between 
January  1st  and  May  1st.    2  I.  R.  R.  54. 

District — Return  by  guardian  residing  abroad  to  be  made  in  dis- 
trict of  ward's  residence;  return  of  resident  guardian  in  dis- 
trict of  guardian's  residence.   3  I.  R.  R.  172. 

Dividends,  see  Rules. 

Executors,  see  Decedents. 


72  FEDERAL  INCOME  TAX  LAW 

to  make  a  return  unless  such  person  has  other  net  income, 
but  only  one  deduction  of  $3,000  shall  be  made  in  the  case 
of  any  such  person.^ 

The  collector  or  deputy  collector  shall  require  every 
list  to  be  verified  by  the  oath  or  affirmation  of  the  party 
rendering  it. 

If  the  collector  or  deputy  collector  have  reason  to 
believe  that  the  amount  of  any  income  returned  is  under- 
stated, he  shall  give  due  notice  to  the  person  making  the 
return  to  show  cause  why  the  amount  of  the  return  should 
not  be  increased,  and  upon  proof  of  the  amount  under- 
stated may  increase  the  same  accordingly. 

If  dissatisfied  with  the  decision  of  the  collector,  such  person 
may  submit  the  case,  with  all  the  papers,  to  the  Commis- 
sioner of  Internal  Revenue  for  his  decision,  and  may  furnish 
sworn  testimony  of  witnesses  to  prove  any  relevant  facts. 

E.  That  all  assessments  shall  be  made  by  the  Commis- 
sioner of  Internal  Revenue  and  all  persons  shall  be  notified 

Return,  as  applicable  to  representatives — Continued 

Father  having  legal  control  of  income  of  minor,  without  guardian, 

should  make  return  thereof  with  his  own.    2  I.  R.  R.  68. 
Guardians,  see  District,  Father,  Rules. 
Guardians  should  return  income  of  minor.    2  I.  R.  R.  68. 
Income,  see  Decedents,  Father,  Guardians. 
Minors,  see  Father,  Guardians. 
Parents,  see  Step-parents. 
Partners,  see  Aliens. 
Personal  representatives,  see  Decedents. 
Step-children  regarded  as  children.    1 1.  R.  R,  156. 
Step-parents  regarded  as  parents.    1  I.  R.  R.  156. 

Return  as  applicable  to  partnerships 

Partnerships  organized  under  laws  which  give  corporate  character- 
istics must  make  return  and  pay  tax.    28  Op.  Atty.  Gen.  189. 

Rules 

Guardian,  return  by  should  always  be  upon  information  and 

belief.    1  I.  R.  R.  181. 
Dividends,  return  of.    10  I.  R.  R.  9;  29  Op.  Atty.  Gen.  217-228; 

T.  D.,  1692,  Dec.  20,  1911;  T.  D.,  1773,  May  21,  1912. 
1  See  Return,  p.  48. 


THE   ACT,    ANNOTATED  73 

of  the  amount  for  which  they  are  respectively  hable  on  or 
before  the  first  day  of  June  of  each  successive  year,  and 
said  assessments  shall  be  paid  on  or  before  the  thirtieth 
day  of  June,  except  in  cases  of  refusal  or  neglect  to  make 
such  return  and  in  cases  of  false  or  fraudulent  returns, 
in  which  cases  the  Commissioner  of  Internal  Revenue 
shall,  upon  the  discovery  thereof,  at  any  time  within  three 
years  after  said  return  is  due,  make  a  return  upon  informa- 
tion obtained  as  provided  for  in  this  section  or  by  existing 
law,  and  the  assessment  made  by  the  Commissioner  of 
Internal  Revenue  thereon  shall  be  paid  by  such  person  or 
persons  immediately  upon  notification  of  the  amount  of 
such  assessment;  and  to  any  sum  or  sums  due  and  unpaid 
after  the  thirtieth  day  of  June  in  any  year,  and  for  ten 
days  after  notice  and  demand  thereof  by  the  collector, 
there  shall  be  added  the  sum  of  5  per  centum  on  the 
amount  of  tax  unpaid,  and  interest  at  the  rate  of  1  per 
centum  per  month  upon  said  tax  from  the  time  the  same 
became  due,  except  from  the  estates  of  insane,  deceased, 
or  insolvent  persons.^ 

All  persons,  firms,  copartnerships,  companies,  corpora- 
tions, joint-stock  companies  or  associations,  and  insurance 
companies,  in  whatever  capacity  acting,  including  lessees 
or  mortgagors  of  real  or  personal  property,  trustees  acting 
in  any  trust  capacity,  executors,  administrators,  agents,  re- 
ceivers, conservators,  employers,  and  all  officers  and  em- 
ployees of  the  United  States  having  the  control,  receipt, 
custody,  disposal,  or  payment  of  interest,  rent,  salaries, 
wages,  premiums,  annuities,  compensation,  remuneration, 
emoluments,  or  other  fixed  or  determinable  annual  gains, 
profits,  and  income  of  another  person,  exceeding  $3,000  for 
any  taxable  year,  other  than  dividends  on  capital  stock, 
or  from  the  net  earnings  of  corporations  and  joint-stock 
companies  or  associations  subject  to  like  tax,  who  are 
required  to  make  and  render  a  return  in  behalf  of  another, 
as  provided  herein,  to  the  collector  of  his,  her,  or  its  dis- 
^  See  Table  of  dates,  Appendix. 


74  FEDERAL   INCOME   TAX   LAW 

trict,  are  hereby  authorized  and  required  to  deduct  and 
withhold  from  such  annual  gains,  profits,  and  income  such 
sum  as  will  be  sufficient  to  pay  the  normal  tax  imposed 
thereon  by  this  section,  and  shall  pay  to  the  officer  of  the 
United  States  Government  authorized  to  receive  the 
same,  and  they  are  each  hereby  made  personally  liable  for 
such  tax.^ 

In  all  cases  where  the  income  tax  of  a  person  is  withheld 
and  deducted  and  paid  or  to  be  paid  at  the  source,  as 
aforesaid,  such  person  shall  not  receive  the  deduction  and 
benefit  of  the  exemption  allowed  in  paragraph  C  of  this 
section  except  by  an  application  for  refund  of  the  tax  ^ 
unless  he  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  file  with  the  per- 
son who  is  required  to  withhold  and  pay  tax  for  him,  a 
signed  notice  in  writing  claiming  the  benefit  of  such 
exemption  and  thereupon  no  tax  shall  be  withheld  upon 
the  amount  of  such  exemption:  ^  Provided,  That  if  any 
person  for  the  purpose  of  obtaining  any  allowance  or 
reduction  by  virtue  of  a  claim  for  such  exemption,  either 
for  himself  or  for  any  other  person,  knowingly  makes  any 
false  statement  or  false  or  fraudulent  representation,  he 
shall  be  liable  to  a  penalty  of  $300;  nor  shall  any  person 
under  the  foregoing  conditions  be  allowed  the  benefit  of 
any  deduction  provided  for  in  subsection  B  of  this  section 
unless  he  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  either  file  with 
the  person  who  is  required  to  withhold  and  pay  tax  for 
him  a  true  and  correct  return  of  his  annual  gains,  profits, 
and  income  from  all  other  sources,  and  also  the  deductions, 
asked  for,  and  the  showing  thus  made  shall  then  become 
a  part  of  the  return  to  be  made  in  his  behalf  by  the  person 
required  to  withhold  and  pay  the  tax,  likewise  make 
application  for  deductions  to  the  collector  of  the  dis- 
trict in  which  return  is  made  or  to  be  made  for  him :  Pro 

>  See  Return,  p.  68.       ,         "  See  Application  for  Refund,  p.  159. 
3  See  Return,  p.  70. 


THE   ACT,   ANNOTATED  75 

vided  further,  That  if  such  person  is  a  minor  or  an  insane 
person,  or  is  absent  from  the  United  States,  or  is  unable 
owing  to  serious  illness  to  make  the  return  and  application 
above  provided  for,  the  return  and  application  may  be 
made  for  him  or  her  by  the  person  required  to  withhold 
and  pay  the  tax,  he  making  oath  under  the  penalties  of 
this  Act  that  he  has  sufficient  knowledge  of  the  affairs 
and  property  of  his  beneficiary  to  enable  him  to  make 
a  full  and  complete  return  for  him  or  her,  and  that  the 
return  and  application  made  by  him  are  full  and  complete:  ^ 
Provided  further,  That  the  amount  of  the  normal  tax 
hereinbefore  imposed  shall  be  deducted  and  withheld  from 
fixed  and  determinable  annual  gains,  profits,  and  income 
derived  from  interest  upon  bonds,  and  mortgages,  or  deeds 
of  trust,  or  other  similar  obligations  of  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies, 
whether  payable  annually  or  at  shorter  or  longer  periods, 
although  such  interest  does  not  amount  to  $3,000,  subject 
to  the  provisions  of  this  section  requiring  the  tax  to  be 
withheld  at  the  source  and  deducted  from  annual  income 
and  paid  to  the  Government;  and  likewise  the  amount  of 
such  tax  shall  be  deducted  and  withheld  from  coupons, 
checks,  or  bills  of  exchange  for  or  in  payment  of  interest 
upon  bonds  of  foreign  countries  and  upon  foreign  mort- 
gages or  like  obligations  (not  payable  in  the  United  States), 
and  also  from  coupons,  checks,  or  bills  of  exchange  for 
or  in  payment  of  any  dividends  upon  the  stock  or  interest 
upon  the  obligations  of  foreign  corporations,  associations, 
and  insurance  companies  engaged  in  business  in  foreign 
countries;  and  the  tax  in  each  case  shall  be  withheld  and 
deducted  for  and  in  behalf  of  any  person  subject  to  the 
tax  hereinbefore  imposed,  although  such  interest,  div- 
idends, or  other  compensation  does  not  exceed  $3,000,  by 
any  banker  or  person  who  shall  sell  or  otherwise  realize 
coupons,  checks,  or  bills  of  exchange  drawn  or  made  in 
payment  of  any  such  interest  or  dividends  (not  payable 

» Return,  p.  71. 


76  FEDERAL  INCOME  TAX  LAW 

in  the  United  States),  and  any  person  who  shall  obtain 
payment  (not  in  the  United  States),  in  behalf  of  another 
of  such  dividends  and  interest  by  means  of  coupons, 
checks,  or  bills  of  exchange,  and  also  any  dealer  in  such 
coupons  who  shall  purchase  the  same  for  any  such  div- 
idends or  interest  (not  payable  in  the  United  States), 
otherwise  than  from  a  banker  or  another  dealer  in  such 
coupons;  but  in  each  case  the  benefit  of  the  exemption 
and  the  deduction  allowable  under  this  section  may  be 
had  by  complying  with  the  foregoing  provisions  of  this 
paragraph/ 

All  persons,  firms,  or  corporations  undertaking  as  a 
matter  of  business  or  for  profit  the  collection  of  foreign 
payments  of  such  interest  or  dividends  by  means  of 
coupons,  checks,  or  bills  of  exchange  shall  obtain  a  license 
from  the  Commissioner  of  Internal  Revenue,  and  shall  be 
subject  to  such  regulations  enabling  the  Government 
to  ascertain  and  verify  the  due  withholding  and  payment 
of  the  income  tax  required  to  be  withheld  and  paid  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  shall  prescribe;  and  any 
person  who  shall  undertake  to  collect  such  payments  as 
aforesaid  without  having  obtained  a  license  therefor,  or 
without  complying  with  such  regulations,  shall  be  deemed 
guilty  of  a  misdemeanor  and  for  each  offense  be  fined  in  a 
sum  not  exceeding  $5,000,  or  imprisoned  for  a  term  not 
exceeding  one  year,  or  both,  in  the  discretion  of  the  court. 

Nothing  in  this  section  shall  be  construed  to  release  a 
taxable  person  from  liabiUty  from  income  tax  nor  shall 
any  contract  entered  into  after  this  Act  takes  effect  be 
valid  in  regard  to  any  Federal  income  tax  imposed  upon 
a  person  liable  to  such  payment.  ^ 

^  See  Return,  p.  69. 

2  This  provision,  imposing  upon  the  taxpayer  ultimate  liability  for 
the  tax,  in  any  event,  should  be  noted  in  view  of  the  several  apparent 
exemptions  of  the  taxpayer,  where  return  and  payment  are  to  be 
made  at  the  source.    It  would  seem  that  if  the  source  withheld,  but 


THE   ACT,    ANNOTATED  77 

The  tax  herein  imposed  upon  annual  gains,  profits,  and 
income  not  faUing  under  the  foregoing  and  not  returned 
and  paid  by  virtue  of  the  foregoing  shall  be  assessed  by 
personal  return  under  rules  and  regulations  prescribed  by 
the  Commissioner  of  Internal  Revenue  and  approved  by 
the  Secretary  of  the  Treasury. 

The  provisions  of  this  section  relating  to  the  deduction 
and  payment  of  the  tax  at  the  source  of  income  shall  only 
apply  to  the  normal  tax  hereinbefore  imposed  upon  indi- 
viduals. 

F.  That  if  any  person,  corporation,  joint-stock  com- 
pany, association,  or  insurance  company  liable  to  make 
the  return  or  pay  the  tax  aforesaid  shall  refuse  or  neglect 
to  make  a  return  at  the  time  or  times  hereinbefore  specified 
in  each  year,  such  persons  shall  be  liable  to  a  penalty 
of  not  less  than  $20  nor  more  than  $1,000. 

Any  person  or  any  officer  of  any  corporation  required 
by  law  to  make,  render,  sign,  or  verify  any  return  who 
makes  any  false  or  fraudulent  return  or  statement  with 
intent  to  defeat  or  evade  the  assessment  required  by  this 
section  to  be  made  shall  be  guilty  of  a  misdemeanor,  and 
shall  be  fined  not  exceeding  $2,000  or  be  imprisoned  not 
exceeding  one  year,  or  both,  at  the  discretion  of  the  court, 
with  the  costs  of  prosecution. 

G.  (a)  That  the  normal  tax  hereinbefore  imposed  ^  upon 
failed  to  pay  the  tax,  the  taxpayer  would  still  be  liable  for  its  pay- 
ment. 

^ "  Normal  tax  hereinbefore  imposed  upon  individuals." 

For  definition  of  "normal  tax,"  (see  p.  44). 

As  to  income  of  foreign  corporation,  (see  pp.  95, 98). 

It  will  be  noted  that  the  act  provides  for  payment  by  corporations 
of  only  the  normal,  and  not  the  additional  or  sm-'tax  imposed 
upon  individuals  having  an  income  of  more  than  twenty 
thousand  dollars  (p.  46). 

The  tax  payable  by  the  corporation  on  its  own  behalf  should  be 
distinguished  from  that  payable  by  the  corporation  as  the 
holder  of  taxable  income  belonging  to  its  stockholders  or  other 
individuals. 

A  consoUdated  corporation,  Uable,  under  the  statute  permitting 


78  FEDERAL   INCOME   TAX   LAW 

individuals  likewise  shall  be  levied,  assessed,  and  paid  ^ 
annually  upon  the  entire  net  income  arising  or  accruing 
from  all  sources  during  the  preceding  calendar  year  to 
every  corporation,  joint-stock  company  or  association, 
and  every  insurance  company,  organized  in  the  United 
States,  no  matter  how  created  or  organized,  but  not  in- 
cluding partnerships;  ^  but  if  organized,  authorized,  or 

consolidation,  for  the  obligations  of  the  constituent  companies, 
is  liable  for  any  taxes  and  penalty  which  have  accrued  against 
any  of  them.    Bailey  v.  R.  R.  Co.,  22  Wall.  604,  22  L.  Ed.  840. 

1 "  Levied,  assessed  and  paid." 

For  note  upon  this  provision,  see  p.  33. 

Note  omission  of  word  "collected"  included  in  the  provisions  as 

to  individuals.     This  would  seem  purely  accidental,  and 

under  the  rule  of  fair  construction,  would  probably  be  held 

to  have  no  significance. 
As  to  taxation  of  corporations  for  1912,  and  Jan.  1-March  1, 1913, 

see  p.  117. 

2 "  Net  income."  (For  general  definitions  of  income,  see  p.  34. 

For  rules  of  computation  of  income,  gross  and  net,  of  corpora- 
tions, see  T.  D.  1571,  Dec.  3, 1909. 

In  applying  to  any  case  arising  imder  this  act,  the  several  defini- 
tions below  noted,  due  effect  should  be  given  to  the  wording 
of  the  particular  act  under  which  the  same  were  stated,  and 
especially  to  the  view  generally  adopted,  that  a  tax  payable 
by  corporations  under  prior  acts  was  an  excise  tax  measured 
by  income  and  paid  for  the  privilege  of  doing  business. 

Income,  applicable  to  corporations,  has  been  construed  to  include 
the  following: 

(See,  also,  p.  34.) 

Accumulations,  see  Earnings,  Profits. 

Accumulations  added  to  contingent  funds  of  savings  institutions 

from  earnings  in  excess  of  interest  allowed  to  depositors. 

United  States  v.  Dollar  Savings  Bank  of  Pittsburgh,  15  I.  R. 

R.  193;  12  I.  R.  R.  157,  Nov.  12,  1870. 
Appreciation  in  value  of  securities.     T.  D.,  1742,  Dec.  5,  1911. 
Bad  debts,  collection  of  debts  returned  in  prior  year  as  bad. 

T.  D.,  1606,  Mch.  29,  1910. 
Capital  assets,  see  Increase. 
Coal  companies,  see  Mining  Companies. 
Damages  awarded  to  corporation  in  excess  of  its  capital  stock 


THE   ACT,    ANNOTATED  79 

existing  under  the  laws  of  any  foreign   country,   then 
upon  the  amount  of  net  income  accruing  from  business 

Income,  applicable  to  corporations — Continued 

for  property  taken  for  a  public  use.    Matson's  Ford  Bridge 
Co.  V.  Commonwealth,  117  Pa.  St.  265,  11  A.  813. 

Deposits  in  State  Bank.  Manhattan  Co.  v.  Blake,  148  U.  S.  412, 
37  L.  Ed.  504,  13  S.  Ct.  640. 

Dividends  declared  by  mistake.  Central  Natl.  Bank  v.  United 
States,  137  U.  S.  355,  34  L.  Ed.  703,  11  S.  Ct.  126. 

Dividends  upon  stock  of  other  corporations.  Spreckels  v.  Mc- 
Clain,  192  U.  S.  397,  48  L.  Ed.  496,  24  S.  Ct.  326. 

Dividends  applied  by  policy  holders  to  payment  of  renewal  pre- 
miums to  shorten  endowment  or  premium  paying  period, 
or  to  purchase  paid  up  additions  and  annuities,  are  income 
of  insiu-ance  company.     T.  D.,  1742,  Dec.  5,  1911. 

Earnings,  see  Accumidations,  Profits,  Receipts. 

Earnings  carried  to  repair  fund.    2  I.  R.  R.  100. 

Earnings,  entire  net,  whether  set  aside  in  particular  manner 
mentioned,  or  not.    3  I.  R.  R.  85. 

Earnings  withheld  by  National  Bank  for  payment  of  State  taxes. 
Central  Natl.  Bank  v.  United  States,  137  U.  S.  355,  34  L.  Ed. 
703,  11  S.  Ct.  126. 

Earnings  of  railroad — earnings  included  in  term  "Income  and 
'    Revenue."    Tompkins  v.  Little  Rock  &  Ft.  S.  Ry.,  15  Fed.  6. 

Gas  companies,  see  Mining  Companies. 

Income  from  foreign  business.    T.  D.  1571,  Dec.  3,  1909. 

Increase  in  value  of  capital  assets  as  determined  by  physical  re- 
valuation and  corresponding  entries  on  books.  T.  D.,  1742, 
Dec.  5,  1911. 

Interest  on  bank  accotmt.  Spreckels  v.  McClain,  192  U.  S.  397, 
48  L.  Ed.  496, 24  S.  Ct.  326. 

Interest  from  United  States  bonds — Upon  theory  that  the  tax 
was  an  excise  tax  paid  for  the  pri^'ilege  of  doing  business. 
28  Op.  Atty.  Gen.  138, 139;  T.  D.,  1583,  Jan.  18, 1910. 

Interest  on  bonds  of  municipality  issued  for  benefit  of  railroad. 
Boutwell  (1864),  p.  226. 

liife  insurance  company,  see  Mutual. 

Manufacturing  corporations,  rule  for  computing  income  of.  T.  D., 
1588,  Jan.  24,  1910. 

Mining,  see  Profits. 

Mining  Co.,  method  of  computing  net  income.  T.  D.,  1675, 
Feb.  14, 191 1;T.  D.,  1796,  Sept.  13, 1912;  T.  D.,  1833,  Feb.  18, 
1913. 


80  FEDERAL  INCOME   TAX   LAW 

transacted  and  capital  invested  within  the  United  States 

during  such  year:  ^ 

Income,  applicable  to  corporations — Continued 

Mutual  Life  Insurance  Co.,  income  of.  Herold  v.  Mut.  Ben. 
Life  Ins.  Co.,  198  Fed.  199,  201  Fed.  918. 

Oil  company,  see  Mining  Company. 

Petroleum  company,  see  Mining  Company. 

Premiums  returnable  to  policy  holders  less  certain  deductions. 
William  Harrison  Last  v.  London  Assurance  Corporation, 
L.  R.  10  A.  C.  438.   Cp.  L.  R.  12  Q.  B.  D.  389. 

Profits  accruing  in  income  year.    1 1.  R.  R.  180. 

Profits  carried  to  construction  account.    1  I.  R.  R.  155. 

Profits  from  sale  of  real  estate.   T.  D.,  1675,  Feb.  14, 1911. 

Profits  held  in  reserve.    11 1.  R.  R.  10. 

Receipts  from  wharfage.  Spreckels  v.  McClain,  192  U.  S.  397,  48 
L.Ed.496,24S.Ct.326. 

Securities,  see  Appreciation. 
Income,  applicable  to  corporations,  has  been  construed  not  to 
include  the  following: 

(See,  also,  p.  37.) 

Dividends  awarded  annually  to  policy  holders,  not  paid  out  of 
net  income,  but  out  of  excess  premium  receipts.  6  I.  R.  R. 
139;  Herold  v.  Mut.  Ben.  Life  Ins.  Co.,  198  Fed.  199;  201 
Fed.  918. 

Deferred  premiums  and  interest,  accrued  but  unpaid.  Herold  v. 
Mut.  Ben.  Life  Ins.  Co.,  198  Fed.  199,  201  Fed.  918. 

Premiums,  unearned,  set  aside  as  reserve.  T.  D.,  1606,  Mch.  29, 
19n. 

Receipts  from  receivers'  sales  of  articles  manufactured  from  raw 
products  in  possession  of  insolvent  corporation  at  commence- 
ment of  receivership,  and  from  sales  of  other  personal  prop- 
erty in  process  of  winding  up  corporate  business.  Gehr  v. 
Iron  Co.,  174  Pa.  St.  430,  34  A.  836. 

Savings  Banks,  undistributed  earnings  of.     13 1.  R.  R.  66, 73. 
*  Doing  business — Corporations 

(See,  also,  p.  43.) 
General  rules: 

Corporations  to  be  subject  to  tax  must  be  organized  and  actually 
engaged  in  business.  Emery,  Bird,  Thayer  Realty  Co.  v. 
United  States,  198  Fed.  242. 

Corporation  considered  as  doing  business  in  a  certain  territory  only 
when  becoming,  in  a  sense,  domesticated  therein.  Caesar  v. 
CapeU,  83  Fed.  403. 


THE   ACT,    ANNOTATED  81 

Provided,  however,  That  nothing  in  this  section  shall 
apply  to  labor,  agricultural,  or  horticultural  organizations, 
Doing  Business,  Corporations — Continued 

Question  as  whether  foreign  corporation  is  carrying  on  busi- 
ness here,  must  be  determined  by  past  or  present  action, 
rather  than  possible  future  action,  under  powers  reserved  in 
existing  contracts,  but  not  exercised.  United  States  v.  Am. 
Bell  Tel.  Co.,  29  Fed.  17  (cited  in  119  Fed.  425). 

The  following  has  been  held  to  be  doing  business: 

Agents,  see  Contracts,  Sales. 

Agents — Solicitation  of  orders  through  resident  agents  to  whom 
goods  are  shipped  for  delivery.  John  Deere  Plow  Co.  v. 
Wyland,  76  P.  863,  69  Kan.  255. 

Branch  offices,  maintenance  of.  United  States  v.  Bank  of  Mon- 
treal, 21  Fed.  236. 

Business — New  Jersey  corporation  doing  business  in  Cuba. 
T.  D.,  1863,  June  26, 1913. 

Business — Corporation  doing  business  wholly  within  Philippine 
Islands  and  assisted  by  Philippine  government.  29  Op. 
Atty.  Gen.  164-169. 

Cable  companies,  having  cable  termini  and  offices  in  England, 
taxable  on  profits  earned  by  transmission  of  messages  from 
England.  Erichson  v.  Last,  L.  R.  8  Q.  B.  D.  414;  cited  in  De 
Beers  v.  Howe,  L.  R.  (1906),  A.  C.  455;  Comrs.  v.  Lovell  &  C. 
Co.  (1908),  A.  C.  46;  Kirkwood  v.  Gadd  (1910),  A.  C.  422. 

Circulars,  see  Maihng. 

Contracts — Contracting  through  resident  agent  to  furnish  labor 
and  material,  and  sending  same  into  state.  St.  L.  Exp.  M.  & 
F.  Co.  V.  Beilharz,  88  S.  W.  512. 

Contracts  to  manage,  and  assist  in  operating  factory  within  a 
state.  Diamond  Glue  Co.  v.  U.  S.  Glue  Co.,  23  S.  Ct.  206, 
187  U.S.  611,  47  L.Ed.  328. 

Contracts — Contracting  to  deliver  and  store  ice  within  state, 
regardless  of  place  of  manufacture.  West  Jersey  Ice  Mfg.  v. 
Armour,  12  Pa.  Super.  Ct.  443. 

Contracts  to  furnish  labor,  materials,  and  construction  within 
state,  and  having  office  therein.  Portland  Co.  v.  Hall  &  Grant 
Con.  Co.,  121  A.  D.  779,  106  N.  Y.  Supp.  649. 

Ferry,  operation  of,  between  New  Jersey  and  Pennsylvania,  by 
New  Jersey  corporation  holding  corporate  meetings,  owning 
real  estate,  and  having  boats  registered  in  New  Jersey,  and 
owning  no  property  in  Pennsylvania,  excepting  lease  of  slip 
for  receipt  and  delivery  of  freight,  held  doing  business  in 


82  FEDERAL  INCOME  TAX  LAW 

or  to  mutual  savings  banks  not  having  a  capital  stock 
represented  by  shares,  or  to  fraternal  beneficiary  societies, 

Doing  Business,  Corporations — Continued 

Pennsylvania.  Commonwealth  v.  Gloucester  Ferry  Co., 
98  Pa.  St.  105.  Reversed  on  another  ground,  114  U.  S.  196, 
29  L.  Ed.  158. 

Foreign  steamship  companies  maintaining  agencies  in  United  States. 
28  Op.  Atty.  Gen.  211-218;  T.  D.,  1600,  March  14, 1910. 

Letters,  see  Mailing. 

Mailing  to  persons  in  a  state  letters  and  circulars  signed  by  officers 
and  issued  for  purposes  of  business.  Commonwealth  v. 
Long,  1  Pa.  Co.  Ct.  190. 

Loan — Making  loan  of  money  secured  by  note  and  mortgage 
within  the  state.  Ginn  v.  New  Eng.  Mortgage  Security 
Co.,  92  Ala.  135,  8  So.  141. 

Office,  see  Contracts. 

Premiums,  collection  of,  by  agent,  although  tax  paid  on  agent's 
own  income  consisting  in  part  of  such  premiums.  Phoenix 
Ins.  Co.  of  London  v.  Corp.  of  City  of  Kingston,  7  Ont.  343. 

Real  estate — Trust  company  contracting  in  a  state  for  sale  of 
real  property  therein  and  bringing  suit  to  enforce  such  con- 
tract.   Pa.  Co.  V.  Bauerle,  143  111.  459,  33  N.  E.  166. 

Real  estate — ^Tenants  in  common  of  building  in  New  York,  or- 
ganized as  corporation  in  New  Jersey  to  take  title  to  the 
land,  taxable  in  New  York.  People  v.  Miller,  181  N.  Y.  328, 
73  N.  E.  1102. 

Sales  of  goods  through  agents  in  a  state.  Cone  v.  Tuscaloosa  Mfg. 
Co.  (C.  C),  76  Fed.  891. 

Steamship  companies  doing  business  in  this  country.  28  Op.  Atty. 
Gen.  211-218;  T.  D.,  1600,  Mch.  14, 1910. 

Trust  companies,  see  Real  Estate. 

Thefollovnng  Jias  been  held  not  to  be  doing  business: 

Agency,  maintenance  of,  for  storage  and  delivery  of  goods  sold  by 
traveling  salesmen,  subject  to  approval  of  home  office.  Rock 
Island  Plow  Co.  v.  Petersen,  101  N.  W.  616,  93  Minn.  356. 

Agents,  see  Loans,  Sales,  Single  Transaction. 

Agents — Employment  of  agent  having  office  for  own  convenience, 
but  not  exclusive  control  of  business,  bank  account,  or  books, 
and  making  no  contracts  for  sales  of  goods.  Penn.  Collieries 
Co.  V.  McKeever,  93  A.  D.  303,  87  N.  Y.  S.  869,  affd.,  183 
N.  Y.  98,  74  N.  E.  935. 

Agents — Solicitation  of  advertisements  through  agents  and  cir- 
culatipn  of  periodicals  by  mail.    Boardman  v.  S.  S.  McClure 


THE   ACT,    ANNOTATED  83 

Orders,  or  associations  operating  under  the  lodge  system, 
or  for  the  exclusive  benefit  of  the  members  of  a  fraternity 

Doing  Business,  Corporations — Continued 

Co.,  123  Fed.  614;  Amer.  Contractor  Pub.  Co.  v.  Baggc,  91 

N.  Y.  S.  73. 
Agents — Solicitation  of  orders,  subject  to  approval  of  home  office, 

through.    Crocker  v.  Muller,  83  N.  Y.  S.  189,  40  Misc.  Rep. 

685;  Tallapoosa  Lumber  Co.  v.  Holbert,  5  A.  D.  559,  39  N.  Y. 

Supp.  432;  Murphy  Varnish  Co.  v.  Gonnell,  10  Misc.  553; 

65  St.  Rep.  819,  32  N.  Y.  Supp.  492;  Havens  &  Geddes  v. 

Diamond,  93  111.  App.  557;  Cummer  Lumber  Co.  v.  Mnfrs. 

Mut.  Fire  Ins.  Corp.,  67  A.  D.  151,  affd.,  173  N.  Y.  633, 

6  N.  E.  1106,  73  N.  Y.  Supp.  668. 
Agents — SoHcitation  of  orders  through — Vio  Chemical  Co.   v. 

Studholme,  53  Misc.  470;  Bruner  v.  Kansas  Moline  Plow 

Co.,  168  Fed.  218. 
Bank  account,  keeping,  in  state  where  corporation  has  no  office 

except  for  registration  of  stock  transfers.     Honeyman  v. 

Colo.  Fuel  &  Iron  Co.,  133  Fed.  96. 
Bonds,  see  Sales. 
Borrowing  moneys.    Union  Trust  Co.  v.  Sickles,  125  A.  D.  105, 

109  N.  Y.  Supp.  262. 
Contracts,  see  Single  Transaction,  Furnishing. 
Contracts  to  furnish  and  adjust  machinery  within  a  state.    Milan 

M.  &  M.  Co.  V.  Gorten,  93  Tenn.  590,  26  L.  R.  A.  135,  27 

S.  W.  791. 
Contracts  to  supply  public  schools  with  text  books.     State  v. 

Amer.  Boojc  Co.,  76  P.  411,  69  Kan.  1, 1  L.  R.  A.  (N.  S.)  1041. 
Contracts — Execution  of  contract  to  light  streets.     Hogan  v. 

City  of  St.  L.,  75  S.  W.  604, 176  Mo.  149. 
Contracts  of  license  for  use  of  patents  by  other  corporations  in 

the  conduct  of  their  business,  although  right  is  reserved  to 

collect  royalties  directly  from  customers  in  case  of  default, 

etc.    People  v.  Amer.  BeU  Tel.  Co.,  117  N.  Y.  241,  22  N.  E. 

1057;  Commonwealth  v.  Amer.  Bell  Tel.  Co.,  129  Pa.  St.  217, 

18  A.  122. 
Contracts  made  within  the  state,  no  sales  being  made  or  business 

transacted.    Coml.  Wood  &  Cement  Co.  v.  Northampton, 

etc.,  Co.,  41  Misc.  242,  84  N.  Y.  Supp.  38. 
Consignment  of  goods  to  brokers  as  agents;  sales  made  in  state 

from  such  goods  directly  at  a  price  fixed  by  corporation,  or 

in  fulfillment  of  orders  approved  by  it;  deposit  of  proceeds 

in  bank  within  state  to  credit  of  corporation;  and  payment 


84  FEDERAL   INCOME   TAX   LAW 

itself  operating  under  the  lodge  system  and  providing 
for  the  payment  of  Ufe,  sick,  accident,  and  other  benefits 

Doing  Business,  Corporations — Continued 

of  brokers'  charges  by  check  after  deposit.  People  ex  rel. 
Southern  Cotton  Oil  Co.  v.  Roberts,  25  A.  D.  13,  48  N.  Y. 
Supp.  1028. 

Consignment  of  goods  by  foreign  corporation ;  sales  made  by  factor 
in  own  name;  and  collection  and  account  for  proceeds 
by  factor.  Bertha  Zinc  &  Mineral  Co.  v.  Clute,  7  Misc. 
123,  57  St.  Rep.  70,  27  N.  Y.  Supp.  342. 

Consignment  of  fruit  to  be  sold  by  consignee  on  profit-sharing 
basis.  Brown  Seed  Co.  v.  Richardson,  53  Misc.  517, 103  N.  Y. 
Supp.  243. 

Corporations  which  have  leased  all  their  property  to  other  corpo- 
rations. T.  D.,  1847,  April  14,  1913;  Minehill  and  S.  H.  R. 
Co.  V.  McCoach,  192  Fed.  670. 

Delivery,  see  Shipment. 

Fire  insurance,  taking  out  through  insurance  brokers  within  the 
state.  Cummer  Lumber  Co.  v.  Associated  Mfrs.  Mut.  Fire 
Ins.  Co.,  67  A.  D.  151,  affd.,  173  N.  Y.  633,  73  N.  Y.  Supp. 
668,  6  N.  E.  1106. 

Foreign  steamship  companies,  occasional  visits  of  vessels  of,  to 
United  States.    T.  D.,  1606,  Mar.  29,  1910. 

Furnishing  materials  for  building  in  pursuance  of  contract.  N.  Y. 
Architectural  Terra  Cotta  Co.  v.  Williams,  102  A.  D.  1,  92 
N.  Y.  Supp.  808,  affd.  184  N.  Y.  579,  77  N.  E.  1192. 

Isolated  transaction,  see  Single  Transaction. 

Lease,  see  Corporations. 

Litigation  in  the  courts  of  a  state.  Am.  L.  &  T.  Co.  v.  East  & 
W.  R.  R.  Co.,  37  Fed.  242;  Christian  v.  Am.  Freehold  L.  &  M. 
Co.,  89  Ala.  198,  7  So.  427;  St.  L.,  A.  &  T.  R.  R.  Co.  v.  Fire 
Assurance  of  Phila.,  55  Ark.  163,  18  S.  W.  43;  Utley  v.  Clark- 
Gardner  L.  M.  Co.,  4  Colo.  369. 

Loaning  moneys  within  a  state  on  application  of  loan  brokers,  the 
agents  of  the  borrowers.  Norton  v.  Union  Bank  &  Trust  Co., 
46  S.  W.  544. 

Means,  see  Supplying. 

Note,  acceptance  of  promissory  notes  payable  in  the  state.  Nor- 
ton V.  W.  H.  Thomas  &  Sons  Co.,  93  S.  W.  711. 

Oil,  see  Purchase. 

Orders,  see  Agents. 

Premiums,  see  Agents. 

Purchasing  oil  within  the  state  for  shipment  to  refineries  without 


THE   ACT,    ANNOTATED  85 

to  the  members  of  such  societies,  orders,  or  associations 
and  dependents  of  such  members,  nor  to  domestic  building 

Doing  Business,  Corporations — Continued 

the  state.    Commonwealth  v.  Standard  Oil  Co.,  101  Pa.  St. 
119. 
Sales,  see  Agents,  Consignment,  Single  Transaction. 
Sales  of  goods  to  customer  within  the  state.    Vaughan  Mach.  Co. 

V.  Lighthouse,  64  A.  D.  138,  71  N.  Y.  S.  799. 
Sales  of  goods  within  the  state   through  traveling  salesmen. 
Toledo  Com.  Co.  v.  Glen  Mfg.  Co.,  55  Ohio  St.  217,  45  N.  E. 
197;  Moline  Plow  Co.  v.  Wilkinson,  105  Mich.  57,  62  N.  W. 
1119. 
Sales  of  goods  within  the  state  through  agents,  on  orders  subject 
to  approval  of  home  office.  Amer.  Broom  &  Brush  Co.  v. 
Addickes,  19  Misc.  Rep.  36,  42  N.  Y.  S.  871;  Belle  City  Mfg. 
Co.  V.  Frizzell,  11  Idaho,  1,  81  P.  58;  Natl.  Knitting  Co.  v. 
Bronner,  20  Misc.  Rep.  125,  45  N.  Y.  B.  714;  Jones  v.  Keeler, 
40  Misc.  Rep.  221,  81  N.  Y.  S.  648;  Harvard  Co.  v.  Wicht, 
99  A.  D.  507,  91  N.  Y.  S.  48;  cited  with  approval  in  Milliken 
V.  FuUerton,  101  A.  D.  606,  91  N.  Y.  S.  1104. 
Sample  room,  maintenance  of,  within  the  state,  all  orders  being 
filled  from  home  office.    Burrows  v.  Caplin,  127  A.  D.  317, 
111  N.  Y.  S.  498;  Fresno  Home  Packing  Co.  v.  Turle  &  Skid- 
more,  60  Misc.  79,  111  N.  Y.  S.  839. 
Shipment  of  goods  into  state  on  order  given  without  the  state. 
Novelty  Mfg.  Co.  v.  Cornell,  88  Hun,  254,  34  N.  Y.  Supp. 
717,  68  St.  Rep.  697;  J.  L.  White  Furnace  Co.  v.  C.  W.  Miller 
Transfer  Co.,  131  A.  D.  559,  115  N.  Y.  S.  625. 
Single  transaction — Sale  of  single  cargo  of  coal  through  agent. 
Ozark  Cooperage  Co.  v.  Quaker  City  Coo- 
perage Co.,  112  A.  D.  62, 98  N.  Y.  Supp.  1 13. 
f*  *'  Execution  of  contract  within  the  state  to 

manufacture  and  deliver  machinery.  Cooper 
Mfg.  Co.  V.  Ferguson,  113  U.  S.  727,  28 
L.  Ed.  1137,  5  S.  Ct.  739. 
f*  f*  Purchase  of  securities  of  another  corporation 

and    execution    of    mortgage    as    security 
therefor.     Gilchrist  v.  Helena  R.  Co.,  47 
Fed.  593. 
S  f*  Isolated  acts  of  business  within  the  state. 

Cooper  Mfg.  Co.  v.  Ferguson,  113  U.  S. 
727,  733,  28  L.  Ed.  1137,  5  S.  Ct.  739;  Na- 
tional Knitting  Co.  v.  Bronner,  20  Misc.  125. 


86  FEDERAL  INCOME  TAX  LAW 

and  loan  associations,  nor  to  cemetery  companies,  organ- 
ized and  operated  exclusively  for  the  mutual  benefit  of 
their  members,  nor  to  any  corporation  or  association  or- 
ganized and  operated  exclusively  for  religious,  charitable, 
scientific,  or  educational  purposes,  no  part  of  the  net  in- 
come of  which  inures  to  the  benefit  of  any  private  stock- 
holder or  individual,  nor  to  business  leagues,  nor  to 
chambers  of  commerce  or  boards  of  trade,  not  organized 
for  profit  or  no  part  of  the  net  income  of  which  inures  to 
the  benefit  of  the  private  stockholder  or  individual;  nor 
to  any  civic  league  or  organization  not  organized  for 
profit,   but  operated  exclusively  for  the  promotion  of 

Doing  Business,  Corporations — Continued 

Single  transaction — Single  loan  by  foreign  mortgage  company 
having  no  office  or  place  of  business  within 
the  state.  Farrior  v.  New  Eng.  Mtg. 
Security  Co.,  88  Ala.  275, 7  S.  200;  Florsheim 
Bros.  Co.  V.  Lester,  GO  Ark.  120,  29  S.  W. 
34,  27  L.  R.  A.  505.  Contra:  State  v. 
Bristol  Sav.  Bank,  108  Ala.  3. 
"  **  Securing    single    order    for    machinery    by 

agent.    Wolff  Dryer  Co.  v.  Bigler,  192  Pa. 
466,  43  A.  1092. 
^fl  f  Single  purchase  of  machinery  within  a  state 

for  shipment  to  state  of  domicile.     Colo. 
Iron  Works  v.  Sierra  Grande  M.  Co.;  15 
Colo.  499,  25  P.  325;  Gates  Iron  Co.  v. 
Cohen,  7  Colo.  App.  341,  43  P.  667. 
"  "  Execution  of  single  contract  for  delivery  of 

paving  stones  quarried  in  another  state, 
although  delivery  extended  over  period  of 
months.  Haddam  Granite  Co.  v.  Brooklyn 
Hts.  R.  R.  Co.,  131  A.  D.  685, 116  N.  Y.  S. 
96. 
Stocks,  see  Sales. 
Subscription  to  newspapers,  solicitation  of  orders  for.    Beard  v. 

Union  Am.  Pub.  Co.,  71  Ala.  60. 
Supplying  means  to  another  with  which  to  do  business.    United 
States  V.  Am.  BeU  Tel.  Co.,  29  Fed.  17. 


The  act,  annotated  $7 

social  welfare.^  Provided  further,  That  there  shall  not  be 
taxed  under  this  section  any  income  derived  from  any 

^  Exemptions,  applicable  to  corporations,  are  declared  by  the  stat- 
ute to  include  the  income  of  the  following: 

(See,  also,  pp.  51,  92.) 

Agricultural  Associations. 

Beneficiary  Societies,  see  Fraternal  Beneficiary  Societies. 

Boards  of  Trade,  etc.,  not  organized  for  profit  and  no  part  of  net 
income  of  which  enures  to  benefit  of  private  stockholder  or 
individual. 

Building  loan  associations  (domestic,  i.  e.,  incorporated  within 
the  Umits  of  the  United  States). 

Business  leagues  not  organized  for  profit,  and  no  part  of  net  in- 
come of  which  enures  to  benefit  of  private  stockholder  or 
individual. 

Cemetery  companies,  organized  and  operated  exclusively  for  the 
mutual  benefit  of  their  members. 

Chambers  of  Commerce,  not  organized  for  profit,  and  no  part  of 
net  income  of  which  enures  to  benefit  of  private  stockholder 
or  individual. 

Charitable  associations,  organized  and  operated  exclusively  for 
such  purpose,  no  part  of  whose  net  income  eniu-es  to  benefit 
of  private  stockholder  or  individual. 

Civic  leagues  or  organizations,  not  organized  for  profit,  but  oper- 
ated exclusively  for  promotion  of  social  welfare. 

Educational  corporations  or  associations,  organized  and  operated 
exclusively  for  such  purpose,  no  part  of  whose  net  income 
enures  to  benefit  of  private  stockholder  or  individual. 

Fraternal  beneficiary  societies,  orders,  or  associations,  operating 
imder  the  lodge  system  or  for  the  exclusive  benefit  of  the 
members  of  a  fraternity,  itself,  operating  under  the  lodge 
system  and  providing  for  the  payment  of  benefits  to  members 
and  dependents  of  members.  (It  is  doubtful  whether  any 
member  of  this  group  is  exempt,  unless  expressly  providing 
by  charter,  by-laws,  or  recognized  system  of  operation  for 
the  payment  of  benefits;  that  is,  whether  an  irregular  or  dis- 
cretionary distribution  of  gratuities  or  like  assistance  would 
be  sufficient  to  meet  the  statutory  requirement.) 

Horticultural  organizations. 

Labor  organizations. 

Life  insurance  companies — as  to  any  premiiun  repaid  or  credited 
to  policy  holder,  etc. 

Mutual  fire  insurance  companies — as  to  any  portion  of  premium 
denosits  returned  to  nolicv  holders. 


88  FEDERAL   INCOME   TAX    LAW 

public  utility  or  from  the  exercise  of  any  essential  gov- 
ernmental function  accruing  to  any  State,  Territory,  or 

Exemptions,  applicable  to  Corporations — Continued 

Mutual  savings  banks  not  having  a  capital  stock  represented  by 

shares. 
Religious  corporation  or  association  organized  and  operated  ex- 
clusively for  such  purpose,  no  part  of  whose  net  income  enures 
to  benefit  of  private  stockholder  or  indi\'idual. 
Scientific  corporations  or  associations  organized  and  operated 
exclusively  for  such  purpose,  no  part  of  whose  net  income 
enures  to  benefit  of  private  stockholder  or  individual. 

Exemptions,  applicable  to  corporations,  have  been  construed  to 
apply  to  the  income  of  the  following: 

(See,  also,  pp.  53,  92). 

Agricultural  associations  not  conducting  business  for  profit,  but 
intended  for  the  advancement  and  encouragement  of  agricul- 
ture.   T.  D.,  1742,  Dec.  5,  1911. 

Asylums,  etc.,  although  charging  those  able  to  pay  for  board, 
treatment,  and  care,  provided  the  receipts  are  disbursed  for 
the  legitimate  mission  cf  such  asylums.  Collins  v.  N.  Y. 
Post-Graduate  Med.  School,  59  App.  Div.  68,  69  N.  Y.  Supp. 
106. 

Building  loan  associations  operating  exclusively  for  the  mutual 
benefit  of  their  members,  who  are  entitled  to  vote  according 
to  membership  and  not  to  their  stockholding,  even  though 
returns  to  members  are  not  equal.  Parkview  Bldg.  & 
Loan  Assn.  v.  Herold,  203  Fed.  876;  cp.  Pac.  Bldg.  &  Loan 
Assn.  V.  Hartson,  201  Fed.  1011;  Treas.  Dec,  1830,  Feb.  1, 
1913. 

Cemetery  associations,  if  not  maintained  for  profit,  even  though 
selling  lots  and  charging  for  opening  graves.  Negley  v.  City 
of  Henderson,  21  Ky.  L.  R.  1394;  .55  S.  W.  554;  City  v.  Board 
of  Assessors,  52  La.  Ann.  223;  26  So.  872. 

Cemetery  associations,  personal  property  of,  a.s  horses,  carriages, 
&c.,  not  exempt  from  taxation.  Rosedale  Cemetery  Assn. 
V.  Linden,  73  N.  J.  L.  421 ;  63  Atl.  904. 

Charitable  organizations  include  associations  devoted,  generally, 
to  objects  beneficial  to  the  public.  Commissioners  v.  Pem- 
sel,  L.  R.  1891,  App.  Cas.  531;  Re  Landis  Estate,  66  N.  J. 
Eq.  291;  56  Atl.  1039. 

Charitable  institutions  deri\'ing  insignificant  income  from  small 
sales  of  farm  products.    People  v.  Purdy,  58  Hun,  386- 


THE   ACT,    ANNOTATED  89 

the  District  of  Columbia,  or  any  political  subdivision 
of  the  State,  Territory,  or  the  District  of  Columbia,  nor 

Ezemptions,  applicable  to  Corporations — Continued 

Companies  not  organized  for  profit  and  doing  business  of  purely 

mutual  character.    Treas.  Dec,  1713,  July  10,  1911. 
Corporations,  see  Insolvent  Corporations. 
Fruitgrowers,  see  Horticultural. 
Horticultural  associations  not  conducting  business  for  profit,  but 

intended  for  the  advancement  and  encouragement  of  agricul- 
ture.   T.  D.,  1742,  Dec.  5, 1911. 
Hospitals,  charging  patients  able  to  pay.    Collins  v.  N.  Y.  Post- 

Graduate  Med.  School,  59  App.  Div.  68,  69  N.  Y.  Supp.  106; 

People  V.  Purdy,  58  Hun,  386;  Powers  v.  Mass.  Hom.  Hosp., 

109  Fed.  294. 
Insolvent  corporations  in  receivers'  hands.     Pa.  Steel  Co.  v. 

New  York  City  Ry.  Co.,  176  Fed.  471;  193  Fed.  286;  198 

Fed.  774. 
Mutual  savings  banks,  although,  in  a  sense,  organized  for  profit. 

T.  D.,  1606,  Mch.  29,  1910. 
Receivers,  see  Insolvent  Corporations. 
Trustees,  having  for  a   certain  period  the  sole   management 

and  control  of  real  property,  and  paying  over  profits  to  so- 

caUed  shareholders.    EUot  v.  Freeman,  220  U.  S.  178,  55 

L.  Ed.  424,  overruling  Mass.  Trust  Cases,  28  Op.  Atty.  Gen. 

234-239. 

Exemptions,  applicable  to  corporations,  have  been  construed  not 
to  apply  to  the  income  of  the  following: 

^e,  also,  pp.  53,  92) . 

Agricultural  associations,  see  Corporations,  Sugar  Plantation. 

Agricultural  organizations  not  having  as  their  chief  object  the 

promotion  or  advancement  of  agricultural  interest,  or  any 

part  of  whose  income  enures  to  the  benefit  of  stockholders. 

T.  D.,  1606,  Mch.  29, 1910;  T.  D.,  1742,  Dec.  5, 1911. 
Agricultural  associations  conducted  for  profit.     T.   D.,    1737, 

Dec.  5,  1911. 
Banks,  see  Natl.  Banks,  Savings  Banks. 
Beneficiary  associations,  see  Fraternal  Societies,  Fire  Ins.  Cos. 
Building  loan  associations  having  a  capital  and  making  loans  to 

non-members.    T.  D.,  1606,  Mch.  29,  1910. 
Building  loan  associations  receiving  moneys  on  deposit  not  in 

payment  for  stock,  and  paying  fixed  rate  of  interest  thereon, 

T.  D.,  1655,  Sept.  24,  1910. 


90  FEDEllAL  INCOME   TAX   LAW 

any  income  accruing  to  the  government  of  the  Philippine 
Islands  or  Porto  Rico,  or  of  any  political  subdivision  of 

Exemptions,  applicable  to  Corporations — Continued 

Building  loan  associations  making  loans  to  non-members,  issuing 
preferred  or  guaranteed-interest  paying  stock,  and  allowing 
directors  to  cancel  outstanding  certificates,  etc.  Pacific  Bldg. 
&  Loan  Assn.  v.  Hartson,  201  Fed.  1011. 

Building  loan  associations  making  loans  to  non-members  and 
issuing  interest  bearing  stock.    T.  D.,  1830,  Feb.  1,  1913. 

Building  loan  associations  issuing  guaranteed-dividend  stock. 
T.  D.,  1606,  Mch.  29,  1910. 

Cwporations  engaged  in  growing  fruits,  vegetables,  and  like  prod- 
ucts for  profit.   T.  D.,  1742,  Dec.  5, 1911. 

Corporations  organized  for  insurance  against  death,  accident,  or 
damage  to  property,  however  maintained,  unless  properly 
classed  as  fraternal  beneficiary  organizations  operating  under 
the  lodge  system.   T.  D.,  1742,  Dec.  5, 1911. 

Corporations,  see  Agricultural,  Horticultural,  Insiu-ance,  Insolvent 
Corporations,  Sugar  Plantation. 

Corporations  not  specifically  enumerated  in  the  act  as  exempt. 
T.  D.,  1606,  Mch.  29,  1910. 

Corjwrations  organized  to  sell  provisions,  etc.,  to  stockholders  and 
others.   T.  D.,  1606,  Mch.  29,  1910. 

Corporations  which  have  conducted  business  during  whole  or  part 
of  tax  year  and  dissolved  before  time  to  make  return.  United 
States  V.  Gen.  Insp.  &  Loading  Co.,  192  Fed.  223;  T.  D.,  1650, 
April  15,  1910;  Dollar  Savings  Bank  v.  United  States,  19 
Wall.  227-240,  86  L.  Ed.  80;  Penn.  Steel  Co.  v.  N.  Y.  City 
Ry.  Co.,  198  Fed.  774;  T.  D.,  1736,  Dec.  4,  1911. 

Corporations,  otherwise  taxable,  although  originally  granted  per- 
petual tax-exemption  by  statute.  City  of  Philadelphia  v. 
Pennsylvania  Hospital,  134  Pa.  St.  171,  19  A.  490. 

Dividends  by  corporation,  one  of  whose  stockholders  was  mimic- 
ipality.  Logan  County  v.  United  States,  169  U.  S.  255,  42  L. 
Ed.  737, 18  S.  a.  361. 

Educational  corporations,  see  School. 

Rre  insurance  companies,  mutual.   T.  D.,  1606,  Mch.  29,  1910. 

Fraternal  beneficiary  associations  not  operating  under  the  lodge 
systemo    T.  D.,  1738,  1742,  Dec.  5,  1911. 

Hail  association,  mutual.   T.  D.,  1606,  Mch.  29, 1910. 

Horticultural  organizations  conducted  for  profit.  T.  D.,  1737, 
Dec.  5, 1911;  T.  D.,  1742,  Dec.  5, 1911. 


THE   ACT,    ANNOTATED  91 

the  Philippine  Islands  or  Porto  Rico:  Provided,  That 
whenever  any  State,  Territory,  or  the  District  of  Col- 
umbia, or  any  pohtical  subdivision  of  the  State  or  Ter- 
ritory, has,  prior  to  the  passage  of  this  Act,  entered 
in  good  faith  into  a  contract  with  any  person  or  cor- 
poration, the  object  and  purpose  of  which  is  to  acquire, 
construct,  operate,  or  maintain  a  public  utility,  no  tax 
shall  be  levied  under  the  provisions  of  this  Act  upon 
the  income  derived  from  the  operation  of  such  public 
utility,  so  far  as  the  payment  thereof  will  impose  a  loss 
or  burden  upon  such  State,  Territory,  or  the  District  of 
Columbia,  or  a  political  subdivision  of  a  State  or  Ter- 
ritory; but  this  provision  is  not  intended  to  confer  upon 
such  person  or  corporation  any  financial  gain  or  exemption 
or  to  relieve  such  person  or  corporation  from  the  payment 
of  a  tax  as  provided  for  in  this  section  upon  the  part  or 

Exemptions,  applicable  to  Corporations — Continued 

Hospitals,  founded  by  charitable  donation,  managed  gratuitously 
by  trustees,  wholly  supported  by  patients'  payments,  and 
showing  annual  surplus  expended  in  enlarging  and  improving 
institution.    Needham  v.  Bowers,  L.  R.  21  Q.  B.  D.  436. 

Insurance,  see  Corporations. 

Libraries,  free  pubUc,  conducted  by  municipal  corporation.  An- 
drews V.  the  Mayor,  L.  J.  R.  N.  S.,  61  Q.  B.  D.  715. 

Limited  partnerships,  see  Partnerships. 

National  banks.   T.  D.,  1606,  Mch.  29, 1910. 

Partnership  associations  possessing  every  privilege  and  power 
essential  to  corporations.    T.  D.,  1606,  Mch.  29,  1910. 

Partnerships,  limited,  organized  for  profit  and  having  capital 
stock  represented  by  shares,  although  no  certificates  of  stock 
are  issued.    Op.  Atty.  Gen.,  Felx  14,  1910. 

Savings  banks  having  capital  similar  to  other  banking  institu- 
tions.   28  Op.  Atty.  Gen.,  189-198. 

School  conducted  by  owners  who  receive  salaries,  although  owneir? 
expend  upon  the  institution,  out  of  private  means,  more  than 
the  amoimt  of  such  salaries,  and  school  is  claimed  to  be  frcf 
to  those  unable  to  pay.  Mundy  v.  Van  Hoose,  104  Ga.  292, 
37  S.  E.  783. 

Sugar  plantation  corporations  selling  products.  T.  D,,  160G, 
Mch.  29,  1910. 


92  FEDERAL   INCOME   TAX   LAW 

portion  of  the  said  income  to  which  such  person  or  corpo- 
ration shall  be  entitled  under  such  contract.^ 

I  Exemptions,  applicable  to  political  sovereignties,  etc.,  are  de- 
clared by  the  statute  to  include  the  following: 

(See,  also,  pp.  51,  87). 

(a)  Income,  from  whatever  source  derived,  of  any  state  or  terri- 
tory, or  of  the  District  of  Columbia,  the  Philippine  Islands, 
or  Porto  Rico,  or  of  any  of  their  political  subdivisions. 
This  exemption,  as  applied  to  states,  is  included  in  order  to 
prevent  an  interference  by  one  sovereignty  with  the  govern- 
mental functions  of  another,  an  interference  as  clearly  pro- 
hibited in  relation  to  finance  as  to  any  other  department  of 
government.  T.  D.,  1634,  May  27,  1910. 
To  territories,  territorial  possessions,  and  District  of  Columbia, 
the  exemption  is  granted  to  conform  to  the  principle  of  uni- 
formity of  burden,  as,  aside  from  the  necessity  and  proprietj' 
of  regarding  such  principle,  the  Federal  Government  would 
undoubtedly  have  power  to  tax  these  political  divisions  as 
it  sees  fit,  they  being  neither  independent  sovereignties  nor 
subdivisions  thereof. 

This  expressly  applies  to  income  derived  from  the  operation  of  a 
public  utiUty,  acquired,  constructed,  operated  or  maintained 
under  contractual  relations  with  a  person  or  corporation,  in 
so  far  as  the  payment  will  impose  a  loss  or  burden  upon  a 
state,  territory,  or  subdivision  thereof,  or  District  of  Columbia, 
but  not  so  far  as  to  relieve  such  person  or  corporation  from 
tax. 

(6)  The  interest  upon  the  obligations  of  a  state  or  any  political 
subdivision  thereof. 

This  relates  to  bonds  or  other  obligations  issued,  not  to  those 
o^Tied  by  a  state  or  mmiicipality  or  anj^  other  political  sub- 
division. It  is  included  for  the  same  reason  as  the  exemption 
last  above  noted.  United  States  v.  Bait.  &  0.  R.  R.  Co., 
17  Wall.  322,  17  L.  Ed.  597. 

Exemptions,  applicable  to  political  sovereignties,  etc.,  have  been 
construed  not  to  apply  to  the  following: 

(See,  also,  pp.  53,  89). 

Bonds  of  a  municipality  issued  for  the  benefit  of  a  railroad.  Bout- 
well,  226. 

Dividends  by  a  corporation,  one  of  whose  stockholders  was  munic- 
ipality. Logan  County  v.  United  States,  169  U.  S.  255,  42 
L.  Ed.  737, 18  S.  Ct.  361. 


THE   ACT,    ANNOTATED  93 

(6)  Such  net  income  shall  be  ascertained  by  deducting 
from  the  gross  amount  of  the  income  of  such  corporation, 
joint-stock  company  or  association,  or  insurance  company, 
received  within  the  year  from  all  sources,  (first)  all  the 
ordinary  and  necessary  expenses  paid  within  the  year  in 
the  maintenance  and  operation  of  its  business  and  prop- 
erties, including  rentals  or  other  payments  required  to  be 
made  as  a  condition  to  the  continued  use  or  possession  of 
property;  (second)  all  losses  actually  sustained  within  the 
year  and  not  compensated  by  insurance  or  otherwise, 
including  a  reasonable  allowance  for  depreciation  by 
use,  wear  and  tear  of  property,  if  any;  and  in  the  case  of 
mines  a  reasonable  allowance  for  depletion  of  ores  and  all 
other  natural  deposits  not  to  exceed  5  per  centum  of  the 
gross  value  at  the  mine  of  the  output  for  the  year  for  which 
the  computation  is  made;  and  in  case  of  insurance  com- 
panies the  net  addition,  if  any,  required  by  law  to  be  made 
within  the  year  to  reserve  funds  and  the  sums  other  than 
dividends  paid  within  the  year  on  policy  and  annuity 
contracts:  Provided,  That  mutual  fire  insurance  com- 
panies requiring  their  members  to  make  premium  de- 
posits to  provide  for  losses  and  expenses  shall  not  return 

Exemptions,  applicable  to  political  sovereignties,  etc. — Continued 

Income  of  a  municipality  from  light  furnished  to  private  con- 
sumers. Dillon  V.  Corp.  of  Haverfordwest,  L.  J.  R.,  1891, 
N.  S.  60,  Q.  B.  477. 

Income  of  business  enterprise  derived  by  a  state  acting  as  a 
partner  therein  or  proprietor  thereof.  Brisco  v.  Bank,  11 
Pet.  323,  9  L.  Ed.  709;  South  Carolina  v.  United  States,  199 
U.  S.  448,  50  L.  Ed.  265,  26  S.  Ct.  110. 

Income  of  municipality  derived  from  coal  dues  originally  included 
in  taxable  incomes,  not  exempt  because  subsequently  made 
applicable  to  general  purposes  of  mimicipality.  Atty.  Gen. 
V.  Black,  L.  R.  6  Exch.  78,  affirmed  308. 

Income  of  quasi-public  corporation  incorporated  by  special  act 
of  Parliament  to  superintend  harbor  and  docks  of  munici- 
pality. Mersey  Docks  &  Harbor  Board  v.  Lucas,  L.  R.  8  App. 
Cases,  891;  Sourey  v.  Harbor  Moorings  Comrs.,  3  Times 
L.  R.  516. 


94  FEDERAL   INCOME   TAX   LAW 

as  income  any  portion  of  the  premium  deposits  returned 
to  their  policy  holders,  but  shall  return  as  taxable  income 
all  income  received  by  them  from  all  other  sources  plus 
such  portions  of  the  premium  deposits  as  are  retained  by 
the  companies  for  purposes  other  than  the  payment  of 
losses  and  expenses  and  reinsurance  reserves:  Provided 
further,  That  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gro^s  income  gross  premiums 
collected  and  received  by  them  less  amounts  paid  for 
reinsurance,  but  shall  be  entitled  to  include  in  deductions 
from  gross  income  amounts  repaid  to  poHcy  holders  on 
account  of  premiums  previously  paid  by  them  and  interest 
paid  upon  such  amounts  between  the  ascertainment 
thereof  and  the  payment  thereof;  and  life  insurance  com- 
panies shall  not  include  as  income  in  any  year  such  portion 
of  any  actual  premium  received  from  any  individual 
policy  holder  as  shall  have  been  paid  back  or  credited  to 
such  individual  policy  holder,  or  treated  as  an  abatement 
of  premium  of  such  individual  policy  holder,  within  such 
year;  (third)  the  amount  of  interest  accrued  and  paid 
within  the  year  on  its  indebtedness  to  an  amount  of  such 
indebtedness  not  exceeding  one-half  of  the  sum  of  its 
interest-bearing  indebtedness  and  its  paid-up  capital 
stock  outstanding  at  the  close  of  the  year,  or  if  no  capital 
stock,  the  amount  of  interest  paid  within  the  year  on  an 
amount  of  its  indebtedness  not  exceeding  the  amount  of 
capital  employed  in  the  business  at  the  close  of  the  year: 
Provided,  That  in  case  of  indebtedness  wholly  secured  by 
collateral  the  subject  of  sale  in  ordinary  business  of  such 
corporation,  joint  stock  company,  or  association,  the  total 
interest  secured  and  paid  by  such  company,  corporation, 
or  association  within  the  year  on  any  such  indebtedness 
may  be  deducted  as  a  part  of  its  expense  of  doing  business : 
Provided  further.  That  in  the  case  of  bonds  or  other 
indebtedness,  which  have  been  issued  with  a  guaranty 
that  the  interest  payable  thereon  shall  be  free  from  taxa- 
tion, no  deduction  for  the  payment  of  the  taj^  herein  im- 


THE   ACT,    ANNOTATED  95 

posed  shall  be  allowed ;  and  in  the  case  of  a  bank,  banking 
association,  loan,  or  trust  company,  interest  paid  within 
the  year  on  deposits  or  on  moneys  received  for  investment 
and  secured  by  interest-bearing  certificates  of  indebted- 
ness issued  by  such  bank,  banking  association,  loan  or 
trust  company;  (fourth)  all  sums  paid  by  it  within  the 
year  for  taxes  imposed  under  the  authority  of  the  United 
States  or  of  any  State  or  Territory  thereof,  or  imposed  by 
the  Government  of  any  foreign  country, — 

Provided,  That  in  the  case  of  a  corporation,  joint-stock 
company  or  association,  or  insurance  company,  organized, 
authorized,  or  existing  under  the  laws  of  any  foreign 
country,  such  net  income  shall  be  ascertained  by  deducting 
from  the  gross  amount  of  its  income  accrued  within  the 
year  from  business  transacted  and  capital  invested  within 
the  United  States,  (first)  all  the  ordinary  and  necessary 
expenses  actually  paid  within  the  year  out  of  earnings  in 
the  maintenance  and  operation  of  its  business  and  prop- 
erty within  the  United  States,  including  rentals  or  other 
payments  required  to  be  made  as  a  condition  to  the  con- 
tinued use  or  possession  of  property;  (second)  all  losses 
actually  sustained  within  the  year  in  business  conducted 
by  it  within  the  United  States  and  not  compensated  by 
insurance  or  otherwise,  including  a  reasonable  allowance 
for  depreciation  by  use,  wear  and  tear  of  property,  if  any, 
and  in  the  case  of  mines  a  reasonable  allowance  for  deple- 
tion of  ores  and  all  other  natural  deposits,  not  to  exceed 
5  per  centum  of  the  gross  value  at  the  mine  of  the  output 
for  the  year  for  which  the  computation  is  made;  and  in 
case  of  insurance  companies  the  net  addition,  if  any,  re- 
quired by  law  to  be  made  within  the  year  to  reserve  funds 
and  the  sums  other  than  dividends  paid  within  the  year  on 
policy  and  annuity  contracts.  Provided  further,  That 
mutual  fire  insurance  companies  requiring  their  members 
to  make  premium  deposits  to  provide  for  losses  and  ex- 
penses shall  not  return  as  income  any  portion  of  the  pre- 
mium deposits  returned  to  their  policy  holders^  but  shall 


96  FEDERAL   INCOME   TAX   LAW 

return  as  taxable  income  all  income  received  by  them  from 
all  other  som-ces  plus  such  portions  of  the  premium  de- 
posits as  are  retained  by  the  companies  for  purposes  other 
than  the  payment  of  losses  and  expenses  and  reinsurance 
reserves:  Provided  further,  That  mutual  marine  insur- 
ance companies  shall  include  in  their  return  of  gross  in- 
come gross  premiums  collected  and  received  by  them  less 
amounts  paid  for  reinsurance,  but  shall  be  entitled  to 
include  in  deductions  from  gross  income  amounts  repaid 
to  policy  holders  on  account  of  premiums  previously  paid 
by  them,  and  interest  paid  upon  such  amounts  between 
the  ascertainment  thereof  and  the  payment  thereof;  and 
life  insurance  companies  shall  not  include  as  income  in 
any  year  such  portion  of  any  actual  premium  received 
from  any  individual  policy  holder  as  shall  have  been  paid 
back  or  credited  to  such  individual  poUcy  holder,  or 
treated  as  an  abatement  of  premium  of  such  individual 
policy  holder,  within  such  year;  (third)  the  amount  of 
interest  accrued  and  paid  within  the  year  on  its  indebted- 
ness to  an  amount  of  such  indebtedness  not  exceeding  the 
proportion  of  one-half  of  the  sum  of  its  interest-bearing 
indebtedness  and  its  paid-up  capital  stock  outstanding  at 
the  close  of  the  year,  or  if  no  capital  stock,  the  capital 
employed  in  the  business  at  the  close  of  the  year  which 
the  gross  amount  of  its  income  for  the  year  from  business 
transacted  and  capital  invested  within  the  United  States 
bears  to  the  gross  amount  of  its  income  derived  from  all 
sources  within  and  without  the  United  States: 

Provided,  That  in  the  case  of  bonds  or  other  indebted- 
ness which  have  been  issued  with  a  guaranty  that  the 
interest  payable  thereon  shall  be  free  from  taxation,  no 
deduction  for  the  payment  of  the  tax  herein  imposed  shall 
be  allowed;  (fourth)  all  sums  paid  by  it  within  the  year 
for  taxes  imposed  under  the  authority  of  the  United  States 
or  of  any  State,  or  Territory  thereof  or  the  District  of 
Columbia.  In  the  case  of  assessment  insurance  companies, 
whether  domestic  or  foreign,  the  actual  deposit  of  sums 


THE   ACT,    ANNOTATED  97 

with  State  or  Territorial  officers,  pursuant  to  law,  as 
additions  to  guarantee  or  reserve  funds  shall  be  treated 
as  being  payments  required  by  law  to  reserve  funds.' 

^Deductions,  applicable  to  corporations  are  declared  by  the  statute, 
to  include  the  following: 

(See,  also,  p.  54). 

(a)  Ordinary  and  necessary  expenses  paid  during  the  year  in  the 
mamtenance  and  operation  of  the  corporate  business  and 
properties,  including  rentals  or  payments  requisite  as  a  con- 
dition to  the  use  or  possession  of  property. 
It  is  upon  the  basis  of  such  allowance  that  a  corporation,  re- 
gardless of  the  amount  of  its  capital  stock  or  indebtedness, 
has  been  held  properly  to  deduct  interest  upon  a  mortgage, 
not  assumed,  which  is  a  hen  upon  purchased  property,  p.  100. 

(6)  Losses  actually  sustained  during  the  year,  not  compensated 
by  insurance  or  otherwise. 

(c)  A  reasonable  allowance  for  depreciation  by  use,  wear  and 

tear. 

(d)  Interest  accrued  and  paid  durmg  the  year  on  indebtedness 
not  exceeding  one-half  the  sum  of  the  corporation's  bonded 
indebtedness  and  paid-up  capital  stock  outstanding  at  the 
close  of  the  year,  or  in  the  case  of  corporations  without  capital 
stock,  one-half  the  sum  of  such  bonded  indebtedness  and 
the  capital  employed  in  the  business  on  such  date. 

Total  interest  paid,  where  such  interest  is  wholly  secured  by 
collateral,  the  subject  of  sale  in  ordinary  business  of  such 
corporation,  joint  stock  company,  or  association  (p.  94). 
Interest  paid  upon  bonds  or  other  indebtedness  issued  "tax- 
free"  shall  not  be  deducted  (p.  94). 

(e)  Taxes  imposed  under  the  authority  of  the  United  States,  or 

any  state  or  territory,  or  by  any  foreign  government,  paid 
during  the  year. 

(J)  In  the  case  of  mines,  a  reasonable  allowance  for  depreciation 
of  ores  and  deposits,  not  exceeding  five  per  cent  of  the  gross 
value,  at  the  mine,  of  the  year's  output. 

(g)  In  the  case  of  banks,  banking  associations,  loan,  and  tnist 
companies,  interest  paid  during  the  year  on  deposits,  or 
monej'S  received  for  investment  and  secured  bj'  interest- 
bearing  certificates  of  indebtedness. 

(h)  In  the  case  of  insurance  companies,  (a)  net  additions,  if  any, 
required  by  law  to  be  made  within  year  to  reserve  tunds 
(actual  deposits  with  state  or  territorial  officers,  pursuant  to 
law,  are  considered  additions  to  guarantee  or  reserve  funds, 


98  FEDERAL  INCOME   TAX   LAW 

(c)  The  tax  herein  unposed  shall  be  computed  upon 
its  entire  net  income  accruing  during  each  preceding 
calendar  year  ending  December  thirty-first:  Provided, 
however,  That  for  the  year  ending  December  thirty-first, 

Deductions,  applicable  to  corporations — Continued 

(b)  Sums  other  than  dividends  paid  within  year  on  policy  and 
annuity  contracts. 

(c)  In  the  case  of  mutual  fire  insurance  companies,  see  Exemp- 
tions, p.  87. 

(d)  In  the  case  of  mutual  marine  insurance  companies,  portions 
of  premiums  repaid  to  policy  holders  and  interest  thereon 
from  date  of  ascertainment  to  date  of  payment. 

(e)  In  the  case  of  life  insurance  companies,  premiimis  returned 
or  credited  (p.  105). 

(/)  In  the  case  of  foreign  corporations,  the  same  deductions  as  in 
the  case  of  domestic  corporations,  except  that  the  deductible 
losses  and  expenses  are  those  of  the  business  conducted  in 
the  United  States;  the  deductible  interest  is  that  on  indebted- 
ness not  exceeding  an  amount  equal  to  the  same  fraction  of 
one-half  the  sum  of  bonded  indebtedness  and  outstanding 
capital  stock  (or  if  no  capital  stock,  capital  employed  in 
the  business  at  the  close  of  the  year)  as  the  income  re- 
ceived from  business  transacted  in  the  United  States  is  of 
the  total  income;  and  the  deductible  taxes  are  those  im- 
posed by  the  United  States,  a  state,  or  territory.  No  pro- 
vision is  made  for  the  deduction  of  total  interest  upon 
indebtedness  secured  by  collateral,  the  subject  of  sale  in 
business  of  such  corporation,  etc.,  as  in  the  case  of  a  domestic 
corporation. 

Deductions,  applicable  to  corporatioAPj  have  been  construed  to 
include  the  following: 

(See,  also,  p.  57). 

Bad  debts,  see  Debts. 

Associations,  expenses  of,  having  an  entity  distinct  from  individual 

shareholders.    10  I.  R.  R.  39. 
Betterments,  see  Improvements. 
Bonds,  see  Interest. 
Bonds  and  proceeds  derived  from  sale  of,  used  for  ordinary  and 

necessary  expenses.    T.  D.,  1606,  Mch.  29,  1910. 
Bonds,  fund  for  amortization  of.    T.  D.,  1727,  Aug.  25,  1911. 
Bonds,  book  credits  for  amortization.   T.  D.,  1742,  Dec.  5, 1911. 
Building,  see  Rent. 


THE   ACT,    ANNOTATED  99 

nineteen  hundred  and  thirteen,  said  tax  shall  be  imposed 
upon  its  entire  net  income  accruing  during  that  portion 
of  said  year  from  March  first  to  December  thirty-first, 
both  dates  inclusive,  to  be  ascertained  by  taking  five- 
Deductions,  applicable  to  corporations — Continued 
Coal  companies,  see  Mining  Companies. 
Construction,  profits  used  in,  or  carried  to  fund  for.    United  States 

V.  Little  Miami,  etc.,  R.  R.  Co.,  108  U.  S.  277,  27  L.  Ed. 

724,  8 1.  R.  R.  19,  2  S.  Ct.  627. 
Cost,  see  Expenses,  Rent. 
Debts,  bad  or  worthless,  charged  off  during  year.    T.  D.,  1606, 

Mch.  29,  1910. 
Deductions  represented  by  cash  disbursements  or  evidenced  in 

other  proper  manner  and  entered  on  corporate  books.    T.  D., 

1606,  Mch.  29,  1910;  United  States  v.  Nipissing  Mines,  202 

Fed.  803. 
Depreciation,  see  Mining  Companies. 
Depreciation,  rule  for  computation  of  deductions.    T.  D.,  1742, 

Dec.  5,  1911. 
Depreciation  in  value  of  securities,  as  evidenced  by  book  entries. 

T.  D.,  1742,  Dec.  5, 1911. 
Depreciation,  pro  rata  part  of,  to  reasonable  amount.    T.  D., 

1606,  Mch.  29,  1910;  United  States  v.  Nipissing  Mines  Co., 

202  Fed.  803. 
Depreciation  of  natural  gas  properties,  rule  as  to  computation  of. 

T.  D.,  1758,  Jan.  22,  1912. 
Depreciation  of  petroleum  properties,  rule  as  to  computation  of. 

T.  D.,  17.55,  Jan.  22, 1912. 
Depreciation  of  mining  properties,  rule  as  to  computation  of.    T. 

D.,  1675,  Feb.  14, 1911. 
Depreciation  in  value  of  stock  and  bond  investments.     United 

States  V.  Little  Miami,  etc.,  Co.,  108  U.  S.  277,  27  L.  Ed,  724, 

2  S.  Ct.  627. 
Dividends,  see  Taxes. 
Dividends  on  stock  of  other  corporations  whose  net  income  does 

not  exceed  $5,000;  Op.  Atty.  Gen.,  Jan.  24,  1910. 
Earnings,  see  Improvements. 
Embezzlement,  see  Losses. 
Equipment,  see  Expenses. 
Expenses  to  oil  corporations  of  drilling  dry  wells.    T.  D.,  1675, 

Feb.  14,  1911. 
Expenses  of  Insurance  Co.  for  renewal  of  office  furniture  and 


100  FEDERAL   INCOME   TAX   LAW 

sixths  of  its  entire  net  income  for  said  calendar  year: 
Provided,  further,  That  any  corporation,  joint-stock  com- 
pany or  association,  .or  insurance  company  subject  to  this 
tax  may  designate  the  last  day  pf  any  month  in  the  year 

Deductions,  applicable  to  corpp;ra,tiQns — Continued 

equipment.     Mutual  Benefit  Life  Ins.  Co.  v.  Herold,  198 
Fed.  199,  201  Fed.  918. 

Expenses  of  foreign  steamship  companies  doing  regular  business 
between  United  States  and  foreign  countries,  for  coal,  stores, 
etc.,  pro  rata  part  of,  as  provided  in  statute  for  interest  deduc- 
tions.   T.  D.,  1606,  Mch.  29,  1910. 

Expenses  of  maintenance,  see  Repairs. 

Fire,  loss  by,  see  Losses. 

Foreign  steamship  companies,  see  Expenses. 

Gas  companies,  see  Mining  Companies. 

Gifts  to  charitable  or  educational  institutions,  or  hospitals  con- 
ducted for  benefit  of  employes.    T.  D.,  1675,  Feb.  14,  1911. 

Improvements,  expenditure  for  new  line  for  purpose  of  shortening 
tracks.  United  States  v.  Marquette  H.  &  0.  R.  Co.,  17  Fed. 
719. 

Improvements,  not  resulting  in  increase  of  value  beyond  that  of 
original  property  in  good  repair.  Grant,  Collector,  v.  New 
Haven  &  H.  R.  R.  Co.,  9  Blatch.  543,  affirmed,  93  U.  S. 
225. 

Insurance  reser\'es.    T.  D.  1727,  Aug.  25, 1911. 

Insurance,  payment  by  Insurance  Co.  for  re-insurance.  1 1 1.  R.  R. 
122. 

Interest  on  portions  of  bonded  or  other  indebtedness  where  aggre- 
gate indebtedness  does  not  exceed  statutory  limit.  T.  D., 
1606,  Mch.  29,  1910. 

Interest,  entire  mortgage  interest,  regardless  of  total  indebtedness, 
where  property  is  purchased  subject  to  mortgage  and  debt 
is  not  assumed.  28  Op.  Atty.  Gen.  198-201;  T.  D.,  1595, 
Feb.  28, 1910.    Contra,  T.  D.  1865,  July  14, 1913. 

Interest  on  bonded  indebtedness  of  subsidiary  companies  assumed 
by  principal  company.    T.  D.,  1606,  Mch.  29,  1910. 

Interest  paid  by  branch  upon  loans  by  principal  office  and  foreign 
bankers.   Anglo,  etc.,  Works  v.  Bell,  38  Solic.  Journal,  325. 

Losses,  all  except  losses  of  capital.  United  States  v.  Central  Natl. 
Bank,  10  Fed.  612;  4  I.  R.  R.  46. 

Losses,  by  embezzlement.  United  States  v.  Central  Natl.  Bank, 
10  Fed.  612. 


♦  THE   ACT,    ANNOTATED  101 

as  the  day  of  the  closing  of  its  fiscal  year  and  shall  be 
entitled  to  have  the  tax  payable  by  it  computed  upon  the 
basis  of  the  net  income  ascertained  as  herein  provided  for 
the  year  ending  on  the  day  so  designated  in  the  year 

Deductions,  applicable  to  corporations — Continued 

Losses  by  fire  or  shipwreck.    5  I.  R.  R.  148. 

Mining,  see  Depreciation. 

Mining,  etc.,  companies,  rule  as  to.   T.  D.,  1675,  Feb.  14,' 1911. 

Notes  issued  during  year.    T.  D.,  1606,  Mch.  29, 1910. 

Office  furniture  and  equipment,  sec  Expenses. 

Oil  companies,  see  Expenses,  Mining  Companies. 

Pensions  to  retired  or  injured  employes  or  dependents.  T.  D., 
1675,  Feb.  14,  1911. 

Petroleum  companies,  see  Mining  Companies. 

Profits,  see  Construction. 

Profits,  surplus,  undivided,  or  retained  for  construction  purposes. 
S  I.  R.  R.  19. 

Profits,  rule  for  computation.    8  I.  R.  R.  19. 

Rent  paid  by  erection  of  building  which  is  to  become  property  of 
landlord.    T.  D.,  1606,  Mch.  29,  1910. 

Rental  value  of  building  occupied  by  corporation.  Russell  v. 
Bank,  13  App.  Cases,  418. 

Re-insurance,  see  Insurance. 

Reserve  held  by  Mutual  Life  Ins.  Co.  required  to  secure  instal- 
ment payments  of  insurance.  Mutual  Benefit  Life  Ins.  Co. 
V.  Herold,  198  Fed.  199. 

Salaries,  rule  as  to.   T.  D.,  1742,  Dec.  5,  1911. 

Shipwreck,  see  Losses. 

Taxes  on  deposits  and  circulation.  -SLR.  R.  74. 

Deductions,  applicable  to  corporations,  have  been  construed  not 
to  include  the  following: 

(See,  also,  p.  60.) 

Associations,  statutory  deductions  for  each  member,  where  profits 

belong  to  association  as  a  distinct  entity.    10  I.  R.  R.  39. 
Betterments,  see  Improvements,  Repairs. 
Betterments  constituting  an  increase  in  capital  investment.  T.  D., 

1675,  Feb.  14,  1911. 
Bonds,  see  Depreciation. 
Buildings,  removal  of,  see  Improvements. 
Capital,  see  Ix)ss. 
Cost,  see  Expense. 


102  FEDERAL  INCOME  TAX  LAW 

* 

preceding  the  date  of  assessment  instead  of  upon  the  basis 
of  the  net  income  for  the  calendar  year  preceding  the  date 
of  assessment;  and  it  shall  give  notice  of  the  day  it  has 
thus  designated  as  the  closing  of  its  fiscal  year  to  the 
collector  of  the  district  in  which  its  principal  business 

Deductions,  applicable  to  corporations — Continued 

Depreciation  in  value  of  corporation's  own  stock.  T.  D.,  160G, 
Mch.  29,  1910. 

Depreciation  of  mine  leased  by  corporation.  T.  D.,  1606,  Mch.  29, 
1910. 

Depreciation,  see  Good  Will. 

Depreciation  in  bonds  and  stocks,  rule  as  to.  T.  D.,  1675,  Feb.  14, 
1911. 

Dividends  by  insurance  companies,  under  guise  of  rebates  or  other- 
wise.   T.  D.,  1742,  Dec.  5,  1911. 

Expense  to  oil  corporations  of  drilUng  new  wells,  if  productive. 
T.  D.,  1675,  Feb.  14,  1911. 

Gifts  to  employees.   T.  D.,  1675,  Feb.  14, 1911. 

Good  will  of  business,  depreciation  in,  &c.  T.  D.,  1675,  Feb.  14, 
1911;  T.  D.,  1742,  Dec.  5, 1911. 

Improvement,  by  removal  of  buildings,  &c.  T.  D.,  1675,  Feb.  14, 
1911. 

Improvements  leading  to  increase  in  original  value.    8  I.  R.  R.  19. 

Improvements  consisting  of  replacement  of  structures,  old  rails, 
etc.,  T.  D.,  1606,  Mch.  29,  1910;  Grant,  Collector,  v.  Hart- 
ford &  New  Haven  R.  R.  Co.,  9  Blatch.  543,  affirmed,  93 
U.  S.  225,  23  L.  Ed.  878. 

Interest  on  government  bonds.  Upon  ground  that  tax  was  excise 
meavsured  by  receipts,  of  corporation.  T.  D.,  1583,  Jan.  18, 
1910. 

Loss  of  capital.   4 1.  R.  R.  46. 

Notes,  payment  on  outstanding.    T.  D.,  1606,  Mch.  29,  1910. 

Oil  companies,  see  Expense. 

Premiums — one-third  of  gross  premiums  not  arbitrarily  deductible 
as  unearned  or  unexhausted,  etc.  Imperial  Fire  Ins.  Co.  v. 
Wilson,  35  Law  Times  Rep.  (1876-7),  271. 

Profits,  surplus  and  undivided.   T.  D.,  1606,  Mch.  29, 1910. 

Repairs,  see  Improvements. 

Reserves  for  taxes.  T.  D.,  1742,  Dec.  5, 1911. 

Stocks,  see  Depreciation. 

Stock  issued  in  payment  of  property.   T.  D.,  1606,  Mch.  29,  1910. 

Taxes,  see  Reserves. 


I'HE   ACT,   ANNOTATED  103 

office  is  located  at  any  time  not  less  than  thirty  days  prior 
to  the  date  upon  which  its  annual  return  shall  be  filed. 

All  corporations,  joint-stock  companies  or  associations, 
and  insurance  companies  subject  to  the  tax  herein  im- 
posed, computing  taxes  upon  the  income  of  the  calendar 
year,  shall,  on  or  before  the  first  day  of  March,  nineteen 
hundred  and  fourteen,  and  the  first  day  of  March  in  each 
year  thereafter,  and  all  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies,  com- 
puting taxes  upon  the  income  of  a  fiscal  year  which  it 
may  designate  in  the  manner  hereinbefore  provided,  shall 
render  a  like  return  within  sixty  days  after  the  close  of  its 
said  fiscal  year,  and  within  sixty  days  after  the  close  of  its 
fiscal  year  in  each  year  thereafter,  or  in  the  case  of  a 
corporation,  joint-stock  company  or  association,  or  in- 
surance company,  organized  or  existing  under  the  laws 
of  a  foreign  country,  in  the  place  where  its  principal  busi- 
ness is  located  within  the  United  States,  in  such  form  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury,  shall  prescribe,  shall 
render  a  true  and  accurate  return  under  oath  or  affirma- 
tion of  its  president,  vice  president,  or  other  principal 
officer,  and  its  treasurer  or  assistant  treasurer,  to  the 
collector  of  internal  revenue  for  the  district  in  which  it  has 
its  principal  place  of  business,  setting  forth  (first)  the 
total  amount  of  its  paid-up  capital  stock  outstanding, 
or  if  no  capital  stock,  its  capital  employed  in  business,  at 
the  close  of  the  year;  (second)  the  total  amount  of  its 
bonded  and  other  indebtedness  at  the  close  of  the  year; 

Deductions,  applicable  to  corporations — Continued 

Taxes,  payments  by  banks  of  taxes  assessed  against  stockholders. 

T.  D.,  1675,  Feb.  14, 1911. 
Taxes,  amount  withheld  to  pay  tax  on  dividends.   United  States  v. 

Central  National  Bank,  24  Fed.  577. 
Taxes,  amount  withheld  to  pay  State  taxes.    Central  Natl.  Bank 

V.  United  States,  137  U.  S.  355,  34  L.  Ed.  703,  311  S.  Ct.  126. 
Taxes  paid  by  corporation  under  act  of  1870.    5  I.  R.  R.  74. 
Timber,  removal  of.    T.  D.,  1675,  Feb.  14,  1911. 


104  FEDERAL  INCOME  TAX  LAW 

(third)  the  gross  amount  of  its  income,  received  during 
such  year  from  all  sources,  and  if  organized  under  the 
laws  of  a  foreign  country  the  gross  amount  of  its  income 
received  within  the  year  from  business  transacted  and 
capital  invested  within  the  United  States;  (fourth)  the 
total  amount  of  all  of  its  ordinary  and  necessary  expenses 
paid  out  of  earnings  in  the  maintenance  and  operation  of 
the  business  and  properties  of  such  corporation,  joint- 
stock  company  or  association,  or  insurance  company 
within  the  year,  stating  separately  all  rentals  or  other 
payments  required  to  be  made  as  a  condition  to  the  con- 
tinued use  or  possession  of  property,  and  if  organized 
under  the  laws  of  a  foreign  country  the  amount  so  paid 
in  the  maintenance  and  operation  of  its  business  within 
the  United  States;  (fifth)  the  total  amount  of  all  losses 
actually  sustained  during  the  year  and  not  compensated 
by  insurance  or  otherwise,  stating  separately  any  amounts 
allowed  for  depreciation  of  property,  and  in  case  of 
insurance  companies  the  net  addition,  if  any,  required  by 
law  to  be  made  within  the  year  to  reserve  funds  and  the 
sums  other  than  dividends  paid  within  the  year  on  policy 
and  annuity  contracts:  Provided  further,  That  mutual  fire 
insurance  companies  requiring  their  members  to  make 
premium  deposits  to  provide  for  losses  and  expenses  shall 
not  return  as  income  any  portion  of  the  premium  deposits 
returned  to  their  policy  holders,  but  shall  return  as  taxable 
income  all  income  received  by  them  from  all  other  sources 
plus  such  portions  of  the  premium  deposits  as  are  retained 
by  the  companies  for  purposes  other  than  the  pajrment  of 
losses  and  expenses  and  reinsurance  reserves:  Provided 
further,  That  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gross  income  gross  premiums 
collected  and  received  by  them  less  amounts  paid  for 
reinsurance,  but  shall  be  entitled  to  include  in  the  deduc- 
tions from  gross  income  amounts  repaid  to  policy  holders 
on  account  of  premiums  previously  paid  by  them,  and 
interest  paid  upon  such  amounts  between  the  ascertain- 


THE    ACT,    ANNOTATED  105 

merit  thereof  and  the  payment  thereof  and  hfe  insurance 
companies  shall  not  include  as  income  in  any  year  such 
portion  of  any  actual  premium  received  from  any  individ- 
ual poHcy  holder  as  shall  have  been  paid  back  or  credited 
to  such  individual  policy  holder  or  treated  as  an  abatement 
of  premium  of  such  individual  policy  holder,  within  such 
year;  and  in  case  of  a  corporation,  joint-stock  company  or 
association,  or  insurance  company,  organized  under  the 
laws  of  a  foreign  country,  all  losses  actually  sustained  by  it 
during  the  year  in  business  conducted  by  it  within  the 
United  States,  not  compensated  by  insurance  or  otherwise, 
stating  separately  any  amounts  allowed  for  depreciation 
of  property,  and  in  case  of  insurance  companies  the  net 
addition,  if  any,  required  by  law  to  be  made  within  the 
year  to  reserve  funds  and  the  sums  other  than  dividends 
paid  within  the  year  on  policy  and  annuity  contracts: 
Provided  further,  That  mutual  fire  insurance  companies 
requiring  their  members  to  make  premium  deposits  to 
provide  for  losses  and  expenses  shall  not  return  as  income 
any  portion  of  the  premium  deposits  returned  to  their 
policy  holders,  but  shall  return  as  taxable  income  all  in- 
come received  by  them  from  all  other  sources  plus  such 
portions  of  the  premium  deposits  as  are  retained  by  the 
companies  for  purposes  other  than  the  payment  of  losses 
and  expenses  and  reinsurance  reserves:  Provided  further, 
That  mutual  marine  insurance  companies  shall  include  in 
their  return  of  gross  income  gross  premiums  collected  and 
received  by  them  less  amounts  paid  for  reinsurance,  but 
shall  be  entitled  to  include  in  deductions  from  gross  income 
amounts  repaid  to  poUcy  holders  on  account  of  premiums 
previously  paid  by  them  and  interest  paid  upon  such 
amounts  between  the  ascertainment  thereof  and  the  pay- 
ment thereof  and  life  insurance  companies  shall  not  in- 
clude as  income  in  any  year  such  portion  of  any  actual 
premium  received  from  any  individual  policy  holder  as 
shall  have  been  paid  back  or  credited  to  such  individual 
policy  holder,  or  treated  as  an  abatement  of  premium  of 


106  FEDERAL  INCOME   TAX   LAW 

such  individual  policy  holder,  within  such  year;  (sixth) 
the  amount  of  interest  accrued  and  paid  within  the  year 
on  its  bonded  or  other  indebtedness  not  exceeding  one-half 
of  the  sum  of  its  interest-bearing  indebtedness  and  its 
paid-up  capital  stock,  outstanding  at  the  close  of  the  year, 
or  if  no  capital  stock,  the  amount  of  interest  paid  within 
the  year  on  an  amount  of  indebtedness  not  exceeding  the 
amount  of  capital  employed  in  the  business  at  the  close 
of  the  year,  and  in  the  case  of  a  bank,  banking  association, 
or  trust  company,  stating  separately  all  interest  paid  by 
it  within  the  year  on  deposits;  or  in  case  of  a  corporation, 
joint-stock  company  or  association,  or  insurance  company, 
organized  under  the  laws  of  a  foreign  country,  interest  so 
paid  on  its  bonded  or  other  indebtedness  to  an  amount  of 
such  bonded  or  other  indebtedness  not  exceeding  the 
proportion  of  its  paid-up  capital  stock  outstanding  at  the 
close  of  the  year,  or  if  no  capital  stock,  the  amount  of 
capital  employed  in  the  business  at  the  close  of  the  year, 
which  the  gross  amount  of  its  income  for  the  year  from 
business  transacted  and  capital  invested  within  the  United 
States  bears  to  the  gross  amount  of  its  income  derived 
from  all  sources  within  and  without  the  United  States; 
(seventh)  the  amount  paid  by  it  within  the  year  for  taxes 
imposed  under  the  authority  of  the  United  States  and 
separately  the  amount  so  paid  by  it  for  taxes  imposed  by 
the  Government  of  any  foreign  country;  (eighth)  the  net 
income  of  such  corporation,  joint-stock  company  or 
association,  or  insurance  company,  after  making  the 
deductions  in  this  subsection  authorized. 

All  such  returns  shall  as  received  be  transmitted  forth- 
with by  the  collector  to  the  Commissioner  of  Internal 
Revenue.^ 

'  Return,  as  applicable  to  corporations — Statutory  provisions. 

(See,  also,  pp.  46,  66.) 

Statutory  requirements  as  to  filing  corporate  returns  are  shown 
by  the  following  table. 


THE  ACT,   ANNOTATED  107 

All  assessments  shall  be  made  and  the  several  corpora- 
tions, joint-stock  companies  or  associations,  and  insurance 
companies  shall  be  notified  of  the  amount  for  which  they 
are  respectively  liable  on  or  before  the  first  day  of  June  of 
each  successive  year,  and  said  assessment  shall  be  paid  on 

Return,  as  applicable  to  corporations — Continued 

As  to  return  for  1912,  and  Jan.  1-Mch.  1,  1913,  see  p.  117. 

Time:  On  or  before  March  1st  of  each  year,  beginning  with  the 
year  1914,  except  wliere  tlie  last  day  of  any  month  has 
been  designated  by  the  corporation  as  the  termination  of 
its  fiscal  year,  in  which  case,  within  sixty  days  after  such 
date. 

Place:  Domestic  corporation:  Office  of  Collector  of  the  district 
in  which  principal  business  office  of  corporation  is  lo- 
cated: 

Foreign  corporation:  Office  of  Collector  of  the  district  in  the  United 
States  in  which  principal  business  of  corporation  is  lo- 
cated. 

Period  covered:  Preceding  year,  ending  December  31st,  unless 
other  fiscal  year  has  been  designated  by  corporation;  in  such 
case,  preceding  fiscal  year  (p.  103). 

By  whom  made,  verified,  and  filed:  Except  as  otherwise  specific- 
ally provided  (pp.  81, 103). 
(a)  Every  corporation,  joint  stock  company,  association,  and 
insurance  company,  organized  in  the  United  States,  taxable 
under  this  act  (pp.  78, 103). 
(6)  Every  corporation,  joint-stock  company,  assbciation,  and 
insurance  company,  organized,  authorized,  or  existing  under 
the  laws  of  any  foreign  country,  taxable  upon  its  net  income 
accruing   from   business   transacted   and    capital   invested 
within  the  United  States,  during  the  preceding  tax  year 
(p.  103). 
(c)  As  to  corporation  in  receiver's  hands,  see  Receivers  (p.  113). 

Exceptions:  No  return  is  required  of: 

(a)  Income  of  a  corporation  exempted  from  the  tax  (pp.  81, 

103)  but  see  Construction,  below. 
(6)  Any   portion    of    the    premium    deposits    paid    back    or 
credited  by   a   life   insurance   company  to  policy  holders 
(pp.  94,  96). 
(c)  Note: — The  act  does  not  provide,  as  in  the  case  of  an  in- 
dividual, that  no  return  need  be  made  by  a  corporation  of 


108  FEDERAL  INCOME  TAX  LAW 

or  before  the  thirtieth  day  of  June:  Provided,  That  every 
corporation,  joint-stock  company  or  association,  and 
insurance  company,  computing  taxes  upon  the  income  of 
the  fiscal  year  which  it  may  designate  in  the  manner 

Returns,  as  applicable  to  corporations — Continued 

any  part  of  its  income  whereof  return  and  deduction  have 
been  made  at  the  source. 

Contents  of  return: 

(a)  By  a  domestic  corporation: 
A  statement  under  oath  or  affirmation  of  its  president,  vice- 
president,  or  other  principal  officer,  and  treasurer  or  assistant 
treasurer,  showing  the  amoimt  of: 

(1)  Total  outstandihg  paid-up  capita!  stock,  or,  if  no  capital 
stock,  capital  employed  in  business  at  the  close  of  the  year: 

(2)  Bonded  and  other  indebtedness  at  close  of  year: 

(3)  Gross  income  during  year  from  all  sources: 

(4)  Ordinary  and  necessary  expenses  paid  out  of  earnings  in 
maintenance  and  operation  of  business  and  properties. 
Separate  statements  of  rental  or  other  payments  required  as 
condition  for  continued  use  or  possession  of  property: 

(5)  Losses  not  compensated  by  insurance  or  otherwise.  Sepa- 
rate statement  of  amounts  allowed  for  depreciation : 

(6)  Interest  paid  during  year  on  indebtedness  not  exceeding 
an  amount  equal  to  the  same  fraction  of  one-half  the  sum  of 
bonded  indebtedness  and  outstanding  capital  stock  (or  if 
no  capital  stock,  capital  employed  in  the  business  at  the 
close  of  the  year)  as  ihe  income  received  from  business  trans- 
acted in  the  United  States  is  of  the  total  income. 

(7)  Taxes  paid  during  year,  imposed  under  authority  of  United 
States.  Taxes  paid  during  year,  imposed  by  government  of 
any  foreign  coimtry: 

(8)  Net  income  of  corporation  after  making  authorized  de- 
ductions: 

(6)  By  a  foreign  corporation: 
A  statement,  verified  as  in  the  case  of  a  domestic  corporation, 
showing  the  amount  of: 

(1)  Paid-up  capital  stock  outstanding,  or  if  none,  capital  em- 
ployed in  business  at  close  of  year: 

(2)  Bonded  and  other  indebtedness  at  close  of  year : 

(3)  Gross  income  received  during  year  from  business  transacted 
and  capital  invested  in  United  States : 


THE   ACT,    ANNOTATED  ;109 

hereinbefore  provided,  shall  pay  the  taxes  due  under  its 
assessment  within  one  hundred  and  twenty  days  after 
the  date  upon  which  it  is  required  to.  file  its  list  or  return 
of  inconae  for  assessment;  except  in  cases  of  refusal  or 

Rettims,  as  applicable  to  corporations — Continued 

(4)  Ordinary  and  necessary  expenses  paid  out  of  earnings  in 

maintenance  and  operation  of  business  in  United  States: 
(5).  Losses  during  year  in  business  conducted  in  United  States, 
not  compensated  by  insurance  or  otherwise,  with  separate 
statement  of  allowances  for  depreciation  of  property: 
(6)  Interest  paid  during  year  on  indebtedness  not  exceeding  an 
amount  equal  to  the  same  fraction  of  one-half  the  sum  of 
bonded  indebtedness  and  outstanding  capital  stock  (or  if  no 
capital  stock,  capital  employed  in  the  business  at  the  close 
of  the  year)  as  the  income  received  from  business  transacted 
in  the  United  States  is  of  the  total  income. 

(7)  Taxes  paid  during  year  imposed  under  authority  of  United 

States: 

Taxes  paid  during  year  imposed  by  government  of  any  foreign 
country: 

(8)  Net  income  after  making  authorized  deductions: 

Note:  The  information  contained  in  items  3,  4,  and  5,  while  ex- 
pressed by  the  statute  to  be  additional  to  that  required  of 
domestic  corporations,  is  presumably  intended  as  a  substitute 
therefor. 

(c)  By  an  insurance  company: 

A  statement,  verified  as  in  the  case  of  a  domestic  qorporation, 
showing  the  same  facts  required  to  be  set  forth  in  the  re- 
turns of  domestic  and  foreign  corporations,  respectively. 

Item  5  is  also  required  to  state  the  net  addition,  if  any,  required  by 
law  to  be  made  during  the  year  to  reserve,  and  sums  other 
than  dividends  paid  during  the  year  on  policy  and  annuity 
contracts. 

Mutual  fire  insurance  companies  requiring  members  to  make 
premium  deposits,  do  not  return  portion  of  such  deposits 
repaid  to  policy  holders,  but  do  return  all  income  received 
from  other  sources,  and  portion  of  deposits  retained  for 
purposes  other  than  payment  of  losses,  expenses,  and  re- 
insurance. 

Mutual  marine  insurance  companies  return,  as  gross  income, 
premiums  received,  less  payments  for  re-insurance;  and,  as 
deductions,  the  portion  of  premiums  repaid  to  policy  holders, 


110  FEDERAL  INCOME   TAX   LAW 

neglect  to  make  such  return,  and  in  cases  of  false  or 
fraudulent  retiu-ns,  in  which  cases  the  Commissioner  of 
Internal  Revenue  shall,  upon  the  discovery  thereof,  at 
any  time  within  three  years  after  said  return  is  due,  make 

Returns,  as  applicable  to  corporations — Continued 

and  interest  paid  upon  such  amounts  between  ascertainment 
and  pajTnent. 

(d)  By  a  bank,  banking  association,  or  trust  company: 
A  statement,  verified  as  in  the  case  of  a  domestic  corporation, 
showing  the  same  facts  required  to  be  set  forth  in  the  returns 
of  domestic  and  foreign  corporations,  respectively. 
Item  6  is  also  required  to  state  separately  all  interest  paid  during 
the  year  on  deposits. 

Returns,  as  applicable  to  corporations — Construction. 

(See,  also,  pp.  49,  71). 

Association  having  gains  which  are  its  sole  property,  and  not 
divisible  among  members,  held  a  person  required  to  make 
return.    10  I.  R.  R.  39. 

Associations  or  trusts  voluntarily  formed  by  parties  in  interest, 
not  organized  "under  the  laws  of  the  United  States,  etc.," 
not  corporations  within  the  meaning  and  intent  of  law. 
T.  D.,  1742,  Dec.  5,  1911. 

Banks,  paying  taxes  assessed  against  stockholders,  should  not 
deduct  amount  so  paid  from  gross  income  shown  in  return. 
T.  D.,  1763,  March  22, 1912. 

Bankruptcy,  see  Corporations. 

Bonds,  see  Return. 

Branch  corporations,  see  Corporations. 

Business,  see  Principal  Place. 

Capital  stock,  see  Profits,  Surplus. 

Capital  stock  construed  as  par  value  of  issued  shares  except  when 
assessable  on  account  of  deferred  payments.  In  such  case, 
amount  actually  paid  on  issued  shares  constitutes  actual, 
paid-up  capital  stock.    T.  D.,  1675,  Feb.  14, 1911. 

Capital  stock  includes  both  preferred  and  common  stock.  T.  D., 
1675,  Feb.  14,  1911. 

Collector,  see  Deputy  Collector. 

Consolidation,  see  Corporations. 

Corporations,  all  must  make  return,  regardless  of  amoubt  of  in- 
come. 28  Op.  Atty.  Gen.  218;  29  Op.  Atty.  Gen.  217-226; 
T.  D.,  1729,  Oct.  9,  1911;  United  States  v.  MiHtary  Cons. 


THE   ACT,    ANNOTATED  111 

a  return  upon  information  obtained  as  provided  for  in 
this  section  or  by  existing  law,  and  the  assessment  made 
by  the  Commissioner  of  Internal  Revenue  thereon  shall 
be  paid  by  such  corporation,  joint-stock  company  or 
association,    or   insurance   company   immediately   upon 

Returns,  as  applicable  to  corporations — Continued 

Co.  (W.  D.  Mo.),  T.  D.,  1774,  May  21,  1912;  United  States 
V.  Acorn  Roofing  Co.  (E.  D.  N.  Y.),  T.  D.,  1784,  July  1,  1912. 

Corporations,  bankrupt — Return  for,  must  be  made  by  trustee 
in  bankruptcy.    T.  D.,  1765,  Feb.  14, 1911. 

Corporations  claiming  special  exemption  should  make  return 
accompanied  by  statement  of  ground  of  claim.  T.  D.,  1675, 
Feb.  14,  1911. 

Corporations  claiming  exemption  may  file  statement  in  lieu  of 
return.   T.  D.,  1806,  Oct.  9,  1912. 

Corporations  consolidated  during  tax  year  must  each  make  return. 
T.  D.,  1606,  March  29,  1910. 

Corporations,  dissolved — Return  for  must  be  made  by  officers. 
T.  D.,  1736,  December  4,  1911;  United  States  v.  Genl.  I.  & 
L.  Co.,  192  Fed.  223. 

Corporations,  foreign,  should  designate  proper  officers  to  make 
return.    T.  D.,  1606,  March  29, 1910. 

Corporations,  dissolved — Return  of,  if  not  made  by  ofiicers,  will 
be  made  by  Commissioner.    T.  D.,  1675,  Feb.  14,  1911. 

Corporations  having  branch  or  subsidiary  companies  must  in- 
clude, in  return,  income  of  such  companies  when  no  distinc- 
tion is  made  in  operating  or  accounting,  by  reason  of  separate 
incorporations.    T.  D.,  1675,  Feb.  14, 1911. 

Corporations  holding  bonds  purchased  above  par,  and  making 
proportionate  annual  deduction  to  equalize  book  and  redemp- 
tion values,  may  return  amortization  depreciation.  T.  D., 
1742,  Dec.  5,  1911. 

Corporations  for  any  variety  of  insurance,  if  not  "fraternal,  etc." 
T.D.,  1742,  Dec.  5, 1911. 

Corporations  leasing  properties  in  consideration  of  rental,  equiva- 
lent to  interest  at  certain  rate  on  stock  and  bonds,  rental 
being  paid  directly  by  a  lessee  to  stock  and  bondholders,  must 
make  returns.    T.  D.,  1742,  Dec.  5,  1911. 

Corporations  liquidated  during  year  may  immediately  make 
and  file  return.    T.  D.,  1742,  Dec.  5, 1911. 

Corporations  not  doing  business  need  make  no  return.  Emerj^, 
Bird,  Thayer  Realty  Co.  v.  United  States,  198  Fed.  242. 


112  FEDERAL   INCOME   TAX   LAW 

notification  of  the  amount  of  such  assessment;  and  to  any 
sum  or  sums  due  and  unpaid  after  the  thirtieth  day  of 
June  in  any  year,  or  after  one  hundred  and  twenty  days 
from  the  date  ori  which  the  return  of  income  is  required  to 

Returns,  as  applicable  to  corporations — Continued 

Corporations  not  specifically  exempt,  required  to  make  returns. 
T.  D.,  1606,  March  29,  1910. 

Corporations  organized  during  year  must  make  return.  T.  D., 
1675,  Feb.  14,  1911. 

Corporations  organized  for  purpose  of  holding  real  estate  must 
make  return.   T.  D.,  1606,  March  29, 1910. 

Corporations  organized  under  laws  of  the  United  States,  state, 
territory,  Alaska,  or  District  of  Columbia — Return  must 
include  income  derived  from  both  domestic  and  foreign 
business.   T.  D.,  1606,  March  29,  1910. 

Corporations  owning  stock  and  bonds,  see  Rules. 

Deputy  collectors,  fihng  return  with,  equivalent  to  filing  with 
collector.    T,  D.,  1606,  Mar.  29,  1910. 

Dividends  in  coin  should  be  returned  at  value  in  legal  tender  at 
time  and  place  of  payment.   5 1.  R.  R.  74. 

Dividends  received  from  non-taxable  corporations  must  be  re- 
turned as  income.   28  Op.  Atty.  Gen.  140-142. 

Dividends  in  scrip  must  be  returned  at  market  value.  7  I.  R.  R. 
60. 

Dissolution,  see  Corporations. 

Domestic  corporations,  see  Corporations. 

Exemptions,  see  Corporations. 

Foreign  corporations,  see  Corporations,  Returns. 

Foreign  steamship  companies,  see  Returns. 

Income,  see  Corporations,  Returns,  Subsidiary  Companies. 

Insurance  companies,  see  Corporations,  Reserves. 

Inventories,  see  Supplemental  Statements. 

Leased  properties,  see  Corporations. 

Liquidation,  see  Corporations. 

Mortgages,  see  Real  Estate. 

Officers,  see  Corporations. 

Principal  place  of  business  held  to  be  principal  office  where  com- 
pany keeps  books  from  which  return  is  prepared,  not  operating 
plant.   T.  D.,  1675,  Feb.  14, 1911. 

Principal  place  of  business  should  be  designated  by  foreign  corpo- 
ration having  several  branch  offices  in  United  States.  T.  D. 
1606,  March  29,  1910. 


THE   ACT,    ANNOTATED  113 

be  made  by  the  taxpayer,  and  after  ten  days  notice  and 
demand  thereof  by  the  collector,  there  shall  be  added  the 
sum  of  5  per  centum  on  the  amount  of  tax  unpaid  and 
interest  at  the  rate  of  1  per  centum  per  month  upon  said 
tax  from  the  time  the  same  becomes  due. 

Returns,  as  applicable  to  corporations — Continued 
Profits,  see  Returns. 
Profits  carried,  or  not  carried  to  any  fund  cannot  be  held  in  reserve 

without  annual  return  and  payment  of  tax.    11 1.  R.  R.  10. 
Profits,  once  returned,  not  be  again  returned  until  distribution. 

11  I.  R.  R.  10. 
Profits  not  to  be  included  in  capital  stock.    T.  D.,  1675,  Feb.  14, 

1911. 
Profits,  undivided,  not  to  be  included  in  capital  stock.    T.  D., 

1675,  Feb.  14,  1911. 
Profits  from  sale  of  real  estate  purchased  prior  to  taking  effect  of 

statute,  should  be  pro-rated  according  to  number  of  years 

land  was  held.    T.  D.,  1675,  Feb.  14, 1911. 
Railroads,  see  Corporations. 
Rieal  estate,  see  Corporations. 
Real  estate,  mortgaged,  should  be  returned  at  full  value,  and 

amount  of  mortgage  returned  as  indebtedness.    T.  D.,  1606, 

March  29,  1910. 
Receivers  make  returns  and  statement  showing  corporation  is 

in  their  hands.    Penn.  etc.,  Co.  v.  N.  Y.  City  Ry.  Co.,  176 

Fed.  471. 
Reserves  of  insurance  companies  required  by  law,  net  addition 

to,  may  be  based  on  highest  amount  of  reserves  required  by 

any  state  in  which  the  company  does  business.    T.  D.,  1742, 
•  Dec.  5,  1911. 
Returns,  see  Subsidiary  Companies. 

Returns  need  not  bear  corporate  seal.   T.  D.,  1675,  Feb.  14,  1911. 
Returns  should  be  signed  and  verified  by  two  of  the  specified 

officers.     Signature  by  one  person  holding  two  oflSces  not 

permissible.   T.  D.,  1675,  Feb.  14, 1911. 
Returns  may  be  signed  by  duly  authorized  agents  of  foreign 

steamship  companies.    T.  D.,  1606,  March  29,  1910. 
Returns  filed  with  Deputy  Collector  regarded  as  filed  with  Collec- 
tor.  T.  D.,  1606,  March  29, 1910. 
Returns  of  income  based  on  any  period  other  than  calendar  or 

fiscal  year  not  permissible.   T.  D.,  1675,  Feb.  14, 1911. 
Returns  where  profits  are  undivided  during  year,  leaving  no 


114  FEDERAL   INCOME   TAX   LAW 

(d)  When  the  assessment  shall  be  made,  as  provided  in 
this  section,  the  returns,  together  with  any  corrections 
thereof  which  may  have  been  made  by  the  commissioner, 
shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open 
to  inspection  as  such:  Provided,  That  any  and  all  such 
returns  shall  be  open  to  inspection  only  upon  the  order  of 
the  President,  under  rules  and  regulations  to  be  prescribed 
by  the  Secretary  of  the  Treasury  and  approved  by  the 
President:  Provided  further,  That  the  proper  officers  of 
any  State  imposing  a  general  income  tax  may,  upon  the 
request  of  the  governor  thereof,  have  access  to  said  returns 
or  to  an  abstract  thereof,  showing  the  name  and  income 
Returns,  as  applicable  to  corporations — Continued 

surplus  at  termination,  should  include  only  amount  divided. 
1 1.  R.  R.  180. 
Sales  of  stock  and  bonds  should  be  accounted  for  as  sales  of  capital 

assets.    T.  D.,  1606,  March  29,  1910. 
Stocks,  see  Capital  Stock,  Returns. 
Subsidiary  companies,  see  Corporations. 

Subsidiary  companies,  distinguished  in  operating  or  accounting 
from  principal  corporation,  must  make  separate  return.  T.  D., 
1675,  Feb.  14, 1911. 
Subsidiary  companies,  receiving  income  in  shape  of  rentals,  etc., 

must  make  separate  return.    T.  D.,  1675,  Feb.  14,  1911. 
Supplemental  statement  must  be  made,  verified,  and  filed  with 
return  showing  approximate  inventory  at  close  of  year  pre- 
ceding first  tax  year  under  statute  where  no  regular  inven- 
tory was  made.    T.  D.,  1578,  Jan.  4,  1910. 
Surplus  is  not  to  be  included  in  capital  stock.  T.  D.,  1675,  Feb.  14, 

1911. 
Trusts,  see  Association. 
Rules,  returns  by 

Corporations  owning  bonds  and  stock.    T.  D.,  1742,  Dec.  5, 

1911: 
Insurance  companies.    T,  D.,  1727,  Aug.  25,  1911;  Imperial 

Fire  Ins.  Co.  v.  Wilson,  35  Law  Times  R.  271. 
Mining  companies.    T.  D.,  1742,  Dec.  5,  1911;  T.  D.,  1796, 

Sept.  13,  1912;  T.  D.,  1833,  Feb.  18, 1913. 
Natural  gas  producing  companies.   T.  D.,  1754,  Jan.  22, 1912. 
Petroleum  producing  companies.    T.  D.,  1755,  Jan,  22,  1912, 


THE   ACT,    ANNOTATED  115 

of  each  such  corporation,  joint-stock  company,  association 
or  insurance  company,  at  such  times  and  in  such  manner 
as  the  Secretary  of  the  Treasury  may  prescribe. 

If  any  of  the  corporations,  joint-stock  companies  or 
associations,  or  insurance  companies  aforesaid,  shall 
refuse  or  neglect  to  make  a  return  at  the  time  or  times 
hereinbefore  specified  in  each  year,  or  shall  render  a  false 
or  fraudulent  return,  such  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  shall  be  liable 
to  a  penalty  of  not  exceeding  $10,000. 

H.  That  the  word  ''State"  or  "United  States"  when 
used  in  this  section  shall  be  construed  to  include  any  Ter- 
ritory, Alaska,  the  District  of  Columbia,  Porto  Rico,  and 
the  Philippine  Islands,  when  such  construction  is  necessary 
to  carry  out  its  provisions. 

I.  That  sections  thirty-one  hundred  and  sixty-seven, 
thirty-one  hundred  and  seventy-two,  thirty-one  hundred 
and  seventy-three,  and  thirty-one  hundred  and  seventy- 
six  of  the  Revised  Statutes  of  the  United  States  as  amended 
are  hereby  amended  so  as  to  read. as  follows: 

"Sec.  3167.  (See  Revised  Statutes,  p.  120). 

"Sec.  3172.  (See  Revised  Statutes,  p.  121). 

"Sec.  3173.  (See  Revised  Statutes,  p.  121). 

"Sec.  3176.  (See  Revised  Statutes,  p.  126). 

J.  That  it  shall  be  the  duty  of  every  collector  of  inter- 
nal revenue,  to  whom  any  payment  of  any  taxes  other 
than  the  tax  represented  by  an  adhesive  stamp  or  other 
engraved  stamp  is  made  under  the  provisions  of  this 
section,  to  give  to  the  person  making  such  payment  a  full 
written  or  printed  receipt,  expressing  the  amount  paid  and 
the  particular  account  for  which  such  payment  was  made; 
and  whenever  such  payment  is  made  such  collector  shall, 
if  required,  give  a  separate  receipt  for  each  tax  paid  by 
any  debtor,  on  account  of  payments  made  to  or  to  be 
made  by  him  to  separate  creditors  in  such  form  that  such 
debtor  can  conveniently  produce  the  same  separately 
to  his  several  creditors  in  satisfaction  of  their  respective 


116  FEDERAL   INCOME   TAX   LAW 

demands  to  the  amounts  specified  in  such  receipts;  and 
such  receipts  shall  be  sufficient  evidence  in  favor  of  such 
debtor  to  justify  him  in  withholding  the  amount  therein 
expressed  from  this  next  payment  to  his  creditor;  but  such 
creditor  may,  upon  giving  to  his  debtor  a  full  written 
receipt,  acknowledging  the  payment  to  him  of  whatever 
sum  may  be  actually  paid,  and  accepting  the  amount  of 
tax  paid  as  aforesaid  (specifying  the  same)  as  a  further 
satisfaction  of  the  debt  to  that  amount,  require  the  sur- 
render to  him  of  such  collector's  receipt. 

K.  That  jurisdiction  is  hereby  conferred  upon  the  dis- 
trict courts  of  the  United  States  for  the  district  within 
which  any  person  summoned  under  this  section  to  appear 
to  testify  or  to  produce  books  shall  reside,  to  compel  such 
attendance,  production  of  books,  and  testimony  by 
appropriate  process. 

L.  That  all  administrative,  special,  and  general  pro- 
visions of  law,  including  the  laws  in  relation  to  the  as- 
sessment, remission,  collection,  and  refund  of  internal- 
revenue  taxes  not  heretofore  specifically  repealed  and  not 
inconsistent  with  the  provisions  of  this  section,  are  hereby 
extended  and  made  applicable  to  all  the  provisions  of  this 
section  and  to  the  tax  herein  imposed. 

M.  That  the  provisions  of  this  section  shall  extend  to 
Porto  Rico  and  the  Philippine  Islands :  Provided,  That  the 
administration  of  the  law  and  the  collection  of  the  taxes 
imposed  in  Porto  Rico  and  the  Philippine  Islands  shall  be 
by  the  appropriate  internal-revenue  officers  of  those  gov- 
ernments, and  all  revenues  collected  in  Porto  Rico  and  the 
Philippine  Islands  thereunder  shall  accrue  intact  to  the 
general  governments  thereof,  respectively:  And  provided 
further,  That  the  jurisdiction  in  this  section  conferred 
upon  the  district  courts  of  the  United  States  shall,  so  far 
as  the  Philippine  Islands  are  concerned,  be  vested  in  the 
courts  of  the  first  instance  of  said  islands:  And  provided 
further,  That  nothing  in  this  section  shall  be  held  to  ex- 
clude from  the  computation  of  the  net  income  the  com- 


THE   ACT,    ANNOTATED  117 

pensation  paid  any  official  by  the  governments  of  the 
District  of  Columbia,  Porto  Rico,  and  the  Philippine 
Islands  or  the  political  subdivisions  thereof. 

*  *  *  (See  pp.  120,  121,  126)  *  *  * 
S.  That,  except  as  hereinafter  provided,  sections  one  to 
forty-two,  both  inclusive,  of  an  Act  entitled  ''An  Act  to 
provide  revenue,  equahze  duties,  and  encourage  the  in- 
dustries of  the  United  States,  and  for  other  purposes," 
approved  August  fifth,  nineteen  hundred  and  nine,  and 
all  Acts  and  parts  of  Acts  inconsistent  with  the  provisions 
of  this  Act,  are  hereby  repealed :  Provided,  That  nothing  in 
this  Act  shall  be  construed  to  permit  any  oaths  to  be 
demanded  or  fees  to  be  charged  except  as  provided  in  this 
Act  or  in  section  twenty-eight  hundred  and  sixty-two  of 
the  Revised  Statutes  of  the  United  States.  *  *  *  Pro- 
vided further,  That  all  excise  taxes  upon  corporations 
imposed  by  section  thirty-eight,  that  have  accrued  or 
have  been  imposed  for  the  year  ending  December  thirty- 
first,  nineteen  hundred  and  twelve,  shall  be  returned,  as- 
sessed, and  collected  in  the  same  manner,  and  under 
the  same  provisions,  liens,  and  penalties  as  if  section 
thirty-eight  continued  in  full  force  and  effect:  And  pro- 
vided further,  That  a  special  excise  tax  with  respect  to  the 
carrying  on  or  the  doing  of  business,  equivalent  to  1 
per  centum  upon  their  entire  net  income,  shall  be  levied, 
assessed,  and  collected  upon  corporations,  joint  stock 
companies,  or  associations,  and  insurance  companies,  of 
the  character  described  in  section  thirty-eight  of  the  Act 
of  August  fifth,  nineteen  hundred  and  nine,  for  the  period 
from  January  first  to  February  twenty-eighth,  nineteen 
hundred  and  thirteen,  both  dates  inclusive,  which  said 
tax  shall  be  computed  upon  one-sixth  of  the  entire  net 
income  of  said  corporations,  joint  stock  companies  or 
associations,  and  insurance  companies,  for  said  year,  said 
net  income  to  be  ascertained  in  accordance  with  the  pro- 
visions of  subsection  G  of  section  two  of  this  Act:  Provided 


118  FEDERAL  INCOME  TAX  LAW 

further,  That  the  provisions  of  said  section  thirty-eight  of 
the  Act  of  August  fifth,  nineteen  hundred  and  nine,  rela- 
tive to  the  collection  of  the  tax  therein  imposed  shall  re- 
main in  force  for  the  collection  of  the  excise  tax  herein 
provided,  but  for  the  year  nineteen  hundred  and  thirteen 
it  shall  not  be  necessary  to  make  more  than  one  return  and 
assessment  for  all  the  taxes  imposed  herein  upon  said 
corporations,  joint  stock  companies  or  associations,  and 
insurance  companies,  either  by  way  of  income  or  excise, 
which  return  and  assessment  shall  be  made  at  the  times 
and  in  the  manner  provided  in  this  Act;  but  the  repeal  of 
existing  laws  or  modifications  thereof  embraced  in  this 
Act  shall  not  affect  any  act  done,  or  any  right  accruing  or 
accrued,  or  any  suit  or  proceeding  had  or  commenced  in 
any  civil  case  before  the  said  repeal  or  modification;  but 
all  rights  and  liabihties  under  said  laws  shall  continue  and 
may  be  enforced  in  the  same  manner  as  if  said  repeal  or 
modifications  had  not  been  made.  Any  offenses  com- 
mitted and  all  penalties  or  forfeitures  or  liabilities  incurred 
prior  to  the  passage  of  this  Act  under  any  statute  embraced 
in  or  changed,  modified,  or  repealed  by  this  Act  may  be 
prosecuted  or  punished  in  the  same  manner  and  with  the 
same  effect  as  if  this  Act  had  not  been  passed.  No  Acts 
of  limitation  now  in  force,  whether  applicable  to  civil 
causes  and  proceedings  or  to  the  prosecution  of  offenses 
or  for  the  recovery  of  penalties  or  forfeitures  embraced  in 
or  modified,  changed,  or  repealed  by  this  Act  shall  be 
affected  thereby,  so  far  as  they  affect  any  suits,  proceed- 
ings, or  prosecutions,  whether  civil  or  criminal,  for  causes 
arising  or  acts  done  or  committed  prior  to  the  passage 
of  this  Act,  which  may  be  commenced  and  prosecuted 
within  the  same  time  and  with  the  same  effect  as  if  this 
Act  had  not  been  passed. 

T.  If  any  clause,  sentence,  paragraph,  or  part  of  this 
Act  shall  for  any  reason  be  adjudged  by  any  court  of  com- 
petent jurisdiction  to  be  invaUd,  such  judgment  shall  not 
affect,  impair,  or  invalidate  the  remainder  of  said  Act,  but 


THE    ACT,    ANNOTATED  ll9 

shall  be  confined  in  its  operation  to  the  clause,  sentence, 
paragraph,  or  part  thereof  directly  involved  in  the  con- 
troversy in  which  such  judgment  shall  have  been  rendered. 

U.  That  unless  otherwise  herein  specially  provided, 
this  Act  shall  take  effect  on  the  day  following  its  passage. 

Approved,  9.10  p.  m.,  October  3,  1913. 


CHAPTER  V 

revised  statutes 

Title  xxv 

Internal  Revenue 

Sec.  3167.  It  shall  be  unlawful  for  any  collector,  deputy 
collector,  agent,  clerk,  or  other  officer  or  employe  of  the 
United  States  to  divulge  or  to  make  known  in  any  man- 
ner whatever  not  provided  by  law  to  any  person  the 
operations,  style  of  work,  or  apparatus  of  any  manufact- 
urer or  producer  visited  by  him  in  the  discharge  of  his 
official  duties,  or  the  amount  or  source  of  income,  profits, 
losses,  expenditures,  or  any  particular  thereof,  set  forth 
or  disclosed  in  any  income  return  by  any  person  or  corpora- 
tion or  to  permit  any  income  return  or  copy  thereof  or  any 
book  containing  any  abstract  or  particulars  thereof  to  be 
seen  or  examined  by  any  person  except  as  provided  by 
law;  and  it  shall  be  unlawful  for  any  person  to  print  or 
publish  in  any  manner  whatever  not  provided  by  law  any 
income  return  or  any  part  thereof  or  the  amount  or  source 
of  income,  profits,  losses,  or  expenditures  appearing  in  any 
income  return;  and  any  offense  against  the  foregoing  pro- 
vision shall  be  a  misdemeanor  and  be  punished  by  a  fine 
not  exceeding  one  thousand  dollars  or  by  imprisonment  not 
exceeding  one  year,  or  both,  at  the  discretion  of  the  court; 
and  if  the  offender  be  an  officer  or  employ^  of  the  United 
States  he  shall  be  dismissed  from  office  and  be  incapable 
thereafter  of  holding  any  office  under  the  Government. 

Source:    Act  June  30,  1864,  c.  173,  §§  36,  38,  13  Stat.  238. 
Act  March  3,  1865,  c.  78,  §  1, 13  Stat.  469. 
Act  Aug.  27,  1894,  c.  349,  28  Stat.  557. 
Aet  Oct.  3,  1913. 
120 


REVISED   STATUTES  121 

Inspection  of  return,  rules  as  to.    T.  D.,  1665,  Nov.  28,  1910. 

Privileged  communication,  declaration  to  assistant  assessor  re- 
specting income  is  not.    10  I.  R.  R.  5. 

Privileged  communication,  return  is  not,  so  as  to  be  withheld  from 
evidence.    10  I.  R.  R.  55. 

Trustee,  &c.,  having  ownership  or  possessory  right  to  stock  is  a 
stockholder  allowed  to  make  inspection,  for  proper  purpose, 
of  corporate  returns,  within  T.  D.,  1665.  T.  D.,  1675,  Feb.  4, 
1911. 

Sec.  3172.  Every  collector  shall,  from  time  to  time, 
cause  his  deputies  to  proceed  through  every  part  of  his 
district  and  inquire  after  and  concerning  all  persons  there- 
in who  are  liable  to  pay  any  internal  revenue  tax,  and  all 
persons  owning  or  having  the  care  and  management  of 
any  objects  liable  to  pay  any  tax,  and  to  make  a  list  of 
such  persons  and  enumerate  said  objects. 

Source:    Act  June  30,  1864,  c.  173,  §  12,  13  Stat.  225. 
Act  Mar.  2,  1867,  c.  169,  §  1,  14  Stat.  471. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 
Act  Aug.  27,  1894,  c.  349,  §  34,  28  Stat.  558. 
Act  Oct.  3,  1913. 

Sec.  3173.  It  shall  be  the  duty  of  any  person,  part- 
nership, firm,  association,  or  corporation,  made  liable 
to  any  duty,  special  tax,  or  other  tax  imposed  by  law, 
when  not  otherwise  provided  for,  in  case  of  a  special  tax, 
on  or  before  the  thirty-first  day  of  July  in  each  year,  in 
case  of  income  tax  on  or  before  the  first  day  of  March 
in  each  year,  and  in  other  cases  before  the  day  on  which 
the  taxes  accrue,  to  make  a  list  or  return,  verified  by  oath 
or  affirmation,  to  the  collector  or  a  deputy  collector  of  the 
district  where  located,  of  the  articles  or  objects,  includ- 
ing the  amount  of  annual  income  charged  with  a  duty  or 
tax,  the  quantity  of  goods,  wares,  and  merchandise  made 
or  sold  and  charged  with  a  tax,  the  several  rates  and  aggre- 
gate amount,  according  to  the  forms  and  regulations  to  be 
prescribed  by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  for 
which  such  person,  partnership,  firm,  association,  or  cor- 


122  FEDERAL  INCOME  TAX  LAW 

poration  is  liable:  Provided,  That  if  any  person  liable  to 
pay  any  duty  or  tax,  or  owning,  possessing,  or  having  the 
care  or  management  of  property,  goods,  wares,  and  mer- 
chandise, articles  or  objects  liable  to  pay  any  duty,  tax, 
or  license,  shall  fail  to  make  and  exhibit  a  list  or  return 
required  by  law,  but  shall  consent  to  disclose  the  partic- 
ulars of  any  and  all  the  property,  goods,  wares,  and  mer- 
chandise, articles,  and  objects  liable  to  pay  any  duty  or  tax, 
or  any  business  or  occupation  liable  to  pay  any  tax  as 
aforesaid,  then,  and  in  that  case,  it  shall  be  the  duty  of 
the  collector  or  deputy  collector  to  make  such  list  or  re- 
turn, which,  being  distinctly  read,  consented  to,  and  signed 
and  verified  by  oath  or  affirmation  by  the  person  so  owning, 
possessing,  or  having  the  care  and  management  as  afore- 
said, may  be  received  as  the  list  of  such  person :  Provided, 
further,  That  in  case  no  annual  list  or  return  has  been 
rendered  by  such  person  to  the  collector  or  deputy  col- 
lector as  required  by  law,  and  the  person  shall  be  absent 
from  his  or  her  residence  or  place  of  business  at  the  time 
the  collector  or  a  deputy  collector  shall  call  for  the  annual 
list  or  return,  it  shall  be  the  duty  of  such  collector  or  dep- 
uty collector  to  leave  at  such  place  of  residence  or  business, 
with  some  one  of  suitable  age  and  discretion,  if  such  be 
present,  otherwise  to  deposit  in  the  nearest  post-office, 
a  note  or  memorandum  addressed  to  such  person,  requir- 
ing him  or  her  to  render  to  such  collector  or  deputy 
collector  the  list  or  return  required  by  law  within  ten 
days  from  the  date  of  such  note  or  memorandum,  verified 
by  oath  or  affirmation.  And  if  any  person  on  being  notified 
or  required  as  aforesaid  shall  refuse  or  neglect  to  render 
such  list  or  return  within  the  time  required  as  aforesaid,  or 
whenever  any  person  who  is  required  to  defiver  a  monthly 
or  other  return  of  objects  subject  to  tax  fails  to  do  so  at 
the  time  required,  or  dehvers  any  return  which,  in  the 
opinion  of  the  collector,  is  false  or  fraudulent,  or  contains 
any  undervaluation  or  understatement,  it  shall  be  lawful 
for  the  collector  to  summon  such  person,  or  any  other 


EE VISED   STATUTES  123 

person  having  possession,  custody,  or  care  of  books  of 
account  containing  entries  relating  to  the  business  of  such 
person,  or  any  other  person  he  may  deem  proper,  to  appear 
before  him  and  produce  such  books,  at  a  time  and  place 
named  in  the  summons,  and  to  give  testimony  or  answer 
interrogatories,  under  oath,  respecting  any  objects  liable 
to  tax  or  the  returns  thereof.  The  collector  may  summon 
any  person  residing  or  found  within  the  State  in  which 
his  district  lies;  and  when  the  person  intended  to  be  sum- 
moned does  not  reside  and  cannot  be  found  within  such 
State,  he  may  enter  any  collection-district  where  such 
person  may  be  found,  and  there  make  the  examination 
herein  authorized.  And  to  this  end  he  may  there  exercise 
all  the  authority  which  he  might  lawfully  exercise  in  the 
district  for  which  he  was  commissioned. 

Source:    Act  June  30,  1864,  c.  172,  §§  11-13,  13  Stat.  225-226. 
Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  101. 
Act  Mar.  2,  1867,  c.  169,  §  1,  14  Stat.  471. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 
Act  Mar.  1,  1879,  c.  125,  §  3,  20  Stat.  330. 
Act  Aug.  27,  1894,  c.  349,  §  34,  28  Stat.  558. 
Act  Oct.  3,  1913. 

(Note  right  of  taxpayer  to  require  return  to  be  prepared  by  col- 
lector upon  information  given  p.  122). 

Books,  no  particular  system  of  keeping,  is  required,  provided 
items  of  business  done  may  be  verified  on  examination. 
T.  D.,  1606,  Mch.  29,  1910;  U.  S.  v.  Nipissing  Mines  Co.,  262 
Fed.  803. 

Books,  production  of  which  may  be  required  are  such  books  of 
witness  as  are  competent  evidence  for  party  requiring  pubh- 
cation,  but  not  such  as  may  be  used  to  refresh  memory  of 
witness.  U.  S.  v.  Tilden,  10  Ben.  566,  Fed.  Cas.  16522;  Boyd 
V.  U.  S.,  116  U.  S.  616,  29  L.  Ed.  746,  6  S.  Ct.  524;  Re  Chad- 
wick,  1  Low.  439,  Fed.  Cas.  2570,  11  I.  R.  R.  126. 

Books,  production  of  which  may  be  required  are  those  of  tax- 
payer, not  of  third  person.    Re  Chadwick,  1  Low.  439. 

Books  may  not  be  required  produced  where  containing  evidence 
subjecting  taxpayer  to  the  penalty  of  forfeiture.  Boyd  v. 
United  States,  116  U.  S.  616. 

Eridence  tending  to  incriminate,  not  available  in  criminal  pro- 


124  FEDERAL   INCOME   TAX   LAW 

ceedings.  People  ex  rel.  Hacklcy  r.  Kelly,  24  N.  Y.  83;  Re 
Phillips,  10  I.  R.  R.  107,  Fed.  Cas.  11097;  U.  S.  Rev.  St. 
(1878),  §  860;  U.  S.  Comp.  St.  (1901),  p.  661;  Re  Strouse,  1 
Saw.  605;  U.  S.  v.  Brown,  1  Sawyer,  531,  Fed.  Cas.  14671,  13 
I.  R.  R.  126. 

Examination  designed  to  permit  making  of  correct  return,  not 
assessment  and  collection  of  unpaid  taxes.  Re  0.  H.  P. 
Archer,  9  Ben.  427,  Fed.  Cas.  506,  24  I.  R.  R.  110. 

Examination,  right  of  claimant  and  counsel  to  be  present  at.  U.  S. 
V.  3  Tons  of  Coal,  21 1.  R.  R.  251,  6  Biss.  379,  Fed.  Cas.  16515. 

Privilege  against  giving  evidence  tending  to  incriminate,  not  avail- 
able. People  ex  rel.  Hackley  v.  Kelly,  24  N.  Y.  83;  Re  Phillips, 
10 1.  R.  R.  107;  U.  S.  Rev.  St.  (1878),  §  860;  U.  S.  Comp.  St. 
(1901),  p.  661;  Re  Strouse,  1  Saw.  605;  U.  S.  v.  Brown,  1  Saw- 
yer, 531.  Contra,  Re  Lippman,  3  Benedict,  95,  Fed.  Cas.  8382. 

Return,  oath  taken  upon,  not  available  in  examination.  Magee  v. 
Denton,  5  Blatch.  130,  Fed.  Cas.  8943. 

Sec.  3174.  Such  summons  shall  in  all  cases  be  served  by 
a  deputy  collector  of  the  district  where  the  person  to  whom 
it  is  directed  may  be  found,  by  an  attested  copy  delivered 
to  such  person  in  hand,  or  left  at  his  last  and  usual  place 
of  abode,  allowing  such  person  one  day  for  each  twenty- 
five  miles  he  may  be  required  to  travel,  computed  from 
the  place  of  service  to  the  place  of  exajnination ;  and  the 
certificate  of  service  signed  by  such  deputy  shall  be  evi- 
dence of  the  facts  it  states  on  the  hearing  of  an  apphcation 
for  an  attachment.  When  the  summons  requires  the  pro- 
duction of  books,  it  shall  be  sufficient  if  such  books  are  de- 
scribed with  reasonable  certainty. 

Source:    Act  June  30,  1864,  e.  172,  §  11-13,  13  Stat.  225-226. 
Act  July  13, 1866,  c.  184,  §  9, 14  Stat.  101. 
Act  Dec.  24,  1872,  c.  13,  17  Stat.  401. 

Sec.  3175.  Whenever  any  person  summoned  under  the 
two  preceding  sections  neglects  or  refuses  to  obey  such 
summons,  or  to  give  testimony,  or  to  answer  interroga- 
tories as  required,  the  collectors  may  apply  to  the  judge 
of  the  district  court  or  to  a  commissioner  of  the  circuit 
court  of  the  United  States  for  the  district  within  which 
the  person  so  summoned  resides  for  an  attachment  against 


REVISED   STATUTES  125 

him  as  for  a  contempt.  It  shall  be  the  duty  of  the  judge 
or  commissioner  to  hear  the  application,  and,  if  satis- 
factory proof  is  made,  to  issue  an  attachment,  directed 
to  some  proper  officer,  for  the  arrest  of  such  person,  and 
upon  his  being  brought  before  him  to  proceed  to  a  hearing 
of  the  case;  and  upon  such  hearing  the  judge  or  commis- 
sioner shall  have  power  to  make  such  order  as  he  shall 
deem  proper  not  inconsistent  with  existing  laws  for  the 
punishment  of  contempts,  to  enforce  obedience  to  the  re- 
quirements of  the  summons,  and  to  punish  such  person  for 
his  default  or  disobedience. 

Source:    Act  June  30,  1864,  c.  173,  §  14,  13  Stat.  226. 
Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  101. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 

Amendment  in  proceedings  may  be  made  by  Court.  Re  Chad- 
wick,  1  Low.  439,  Fed.  Cas.  2570,  111.  R.  R.  126. 

Appeal  cannot  be  taken  from  decision  of  judge  in  contempt  pro- 
ceedings. Re  Meadow  &  Bros.,  1  Abb.  (U.  S.)  317,  Fed.  Cas. 
No.  9375,  10  I.  R.  R.  74. 

Attachment  may  issue,  when.  Stanwood  v.  Green,  2  Abb.  (U.  S.) 
184,  Fed.  Cas.  13331. 

Books,  see  Fraud. 

Books,  production  of  third  person's  may  not  be  required.  Re 
Chadwick,  1  Low.  439,  Fed.  Cas.  2570. 

Contempt,  commissioner  no  power  to  commit  for.  Ex  parte  Doll, 
7  Phil.  595,  Fed.  Cas.  3968;  Re  Mason,  43  Fed.  515. 

Contempt,  request  of  opportunity  for  consultation  with  counsel, 
is  not.    U.  S.  V.  Fordyce,  13  I.  R.  R.  77,  Fed.  Cas.  15130. 

District  court  judge,  jurisdiction  of.  Re  Archer,  9  Ben.  427,  Fed. 
Cas.  506;  Re  Lippman,  3  Ben.  95,  Fed.  Cas.  8382,  9  L  R.  R. 
1;  Re  Meador,  1  Abb.  (U.  S.)  317,  Fed.  Cas.  9375,  10 1.  R.  R. 
74;  Stanwood  v.  Green,  2  Abb.  184,  Fed.  Cas.  13331. 

Examination,  expiration  of  authority  for,  when.  Re  Brown,  Fed. 
Cas.  1977,  3  I.  R.  R.  134. 

Fraud,  destruction  or  disappearance  of  books  prima  facie  evidence 
of.    1  I.  R.  R.  155. 

Service  upon  clerk  of  railroad  company  sufficient  basis  for  attach- 
ment.   lOLR.  R.  20. 

Summons,  cause  of  issuance  should  be  stated.  Re  Chadwick,  1 
Low.  439,  Fed.  Cas.  2570,  111.  R.  R.  12^. 


126  FEDERAL   INCOME   TAX   LAW 

Sec.  3176.  When  any  person,  corporation,  company  or 
association  refuses  or  neglects  to  render  any  return  or 
list  required  by  law,  or  renders  a  false  or  fraudulent  return 
or  list,  the  collector  or  any  deputy  collector  shall  make, 
according  to  the  best  information  which  he  can  obtain, 
including  that  derived  from  the  evidence  elicited  by  the 
examination  of  the  collector,  and  on  his  own  view  and 
information,  such  list  or  return,  according  to  the  form 
prescribed,  of  the  income,  property,  and  objects  Uable  to 
tax  owned  or  possessed  or  under  the  care  or  management 
of  such  person  or  corporation,  company,  or  association, 
and  the  Commissioner  of  Internal  Revenue  shall  assess 
all  taxes  not  paid  by  stamps,  including  the  amount,  if  any, 
due  for  special  tax,  income  or  other  tax,  and  in  case  of 
any  return  of  a  false  or  fraudulent  list  or  valuation  inten- 
tionally he  shall  add  one  hundred  per  centum  to  such 
tax;  and  in  case  of  a  refusal  or  neglect,  except  in  cases  of 
sickness  or  absence,  to  make  a  Ust  or  return,  or  to  verify 
the  same  as  aforesaid,  he  shall  add  fifty  per  centum  to 
such  tax.  In  case  of  neglect  occasioned  by  sickness  or 
absence  as  aforesaid  the  collector  may  allow  such  further 
time  for  making  and  delivering  such  fist  or  return  as  he 
may  deem  necessary,  not  exceeding  thirty  days.  The 
amount  so  added  to  the  tax  shall  be  collected  at  the  same 
time  and  in  the  same  manner  as  the  tax  unless  the  neglect 
or  falsity  is  discovered  after  the  tax  has  been  paid,  in  which 
case  the  amount  so  added  shall  be  collected  in  the  same 
manner  as  the  tax;  and  the  list  or  return  so  made  and 
subscribed  by  such  collector  or  deputy  collector  shall  be 
held  prima  facie  good  and  sufficient  for  all  legal  pur- 
poses. 

Smirce:    Act  June  30,  1864,  c.  173,  §  14,  13  Stat.  226. 
Act  July  13,  1S66,  c.  184,  §  9,  14  Stat.  101. 
Act  Dec.  24,  1872,  c.  13,  §  2,  17  Stat.  402. 
Act  Mar.  1,  1879,  c.  125,  §  3,  20  Stat.  331. 
Act  Aug.'  27,  1894,  c.  349,  §  34,  28  Stat.  559. 
Act  Oct.  3,  1913. 


KEVISED'  STATUTES  127 

Assessor,  see  Penalty. 

Collector  has  no  discretion  to  omit  imposition  of  penalty.  2  I.  R. 
R.  36. 

Construction,  statute  must  be  precisely  followed  where  word 
"must"  is  used.  Where  word  "may"  is  used,  penalty  should 
be  imposed  unless  assessor  is  satisfied  of  impossibility  of  com- 
pliance with  statutory  requirements.    2  I.  R.  R.  36. 

Construction — statutory  penalty  cannot  be  varied  by  jury.  T.  D., 
1774,  May  21,  1912. 

Discretion,  see  Remission. 

Penalty  assessable  against  "source"  only  on  basis  of  the  amount 
of  tax  not  withheld.    3  I.  R.  R.  60. 

Default  in  filing  return  imposes  liability  for  penalty  without  notice 
or  demand.    3  I.  R.  R.  151. 

Falsity  of  return  need  not  be  wilful.  German  Sav.  Bk.  v.  Arch- 
bold,  15  Blatch.  398,  Fed.  Cas.  5364.  Reversed  on  another 
ground,  104  U.  S.  708,  26  L.  Ed.  901. 

Fraud,  see  Penalty. 

Penalty — ^Authority  for  imposition  of  any,  must  be  found  in  stat- 
utes.   Craft  V.  Schafer,  153  Fed.  175. 

Penalty  for  fraudulent  omission  not  collectible  where  reassessment 
included  illegal  tax,  or  until  assessor  had  adjudged  omission 
fraudulent  and  penalty  to  have  been  incurred.  Mich.  Central 
R.  R.  Co.  V.  Slack,  100  U.  S.  647,  25  L.  Ed.  647. 

Penalty  for  fraud  must  be  imposed.    3  I.  R.  R.  60. 

Penalty — 50%,  imposable  for  understatement,  although  there  is 
no  intention  to  defraud.    3  I.  R.  R.  60. 

Penalty  might  be  added  by  assessor  before,  but  not  after,  return 
of  list  to  collector.    11  Op.  Atty.  Gen.  280. 

Penalty  not  a  substitute  for  payment  of  tax.  U.  S.  v.  Chamber- 
lain, 219  U.  S.  250,  55  L.  Ed.  204. 

Penalty,  if  not  claimed,  will  not  be  granted  in  suit  for  tax.  U.  S.  v. 
Erie  Ry.  Co.,  106  U.  S.  327,  703,  27  L.  Ed.  151,  1  S.  Ct.  223. 

Penalty,  single,  only,  for  all  failures  to  make  returns  prior  to  com- 
mencement of  action  to  recover.  U.  S.  v.  Bklyn.  &c.  R.  R., 
14  Fed.  284;  U.  S.  v.  N.  Y.  Guaranty  Co.,  8  Ben.  269,  Fed. 
Cas.  15872. 

Remission,  no  discretion  in  administrative  officers  to  allow.  T.  D., 
1701,  May  27,  1911. 

Return,  see  Default. 

Understatement,  see  Penalty. 

Sec.  3177.  Any  collector,  deputy  collector,  or  inspector 
may  enter,  in  the  day-time,  any  building  or  place  where 


128  FEDERAL  INCOME  TAX  LAW 

any  articles  or  objects  subject  to  tax  are  made,  produced, 
or  kept,  within  his  district,  so  far  as  it  may  be  necessary, 
for  the  purpose  of  examining  said  articles  or  objects.  And 
any  owner  of  such  building  or  place,  or  person  having 
the  agency  or  superintendence  of  the  same,  who  refuses 
to  admit  such  officer,  or  to  suffer  him  to  examine  such 
article  or  articles,  shall,  for  every  such  refusal,  forfeit 
five  hundred  dollars.  And  when  such  premises  are  open 
at  night,  such  officers  may  enter  them  while  so  open,  in 
the  performance  of  their  official  duties.  And  if  any  person 
shall  forcibly  obstruct  or  hinder  any  collector,  deputy 
collector,  or  inspector,  in  the  execution  of  any  power  and 
authority  vested  in  him  by  law,  or  shall  forcibly  rescue 
or  cause  to  be  rescued  any  property,  articles,  or  objects 
after  the  same  shall  have  been  seized  by  him,  or  shall 
attempt,  or  endeavor  so  to  do,  the  person  so  offending, 
excepting  in  cases  otherwise  provided  for,  shall,  for  every 
such  offense,  forfeit  and  pay  the  sum  of  five  hundred 
dollars,  or  double  the  value  of  the  property  so  rescued, 
or  be  imprisoned  for  a  term  not  exceeding  two  years,  at 
the  discretion  of  the  court. 

Source:    Act  June  30,  1864,  c.  173,  §§  37-38,  13  Stat.  238. 

Commissioner,  authority  of  cannot  be  delegated.    United  States  v. 

Rhawn,  22  I.  R.  R.  235,  Fed.  Cas.  16150. 
Commissioner,  entrance  and  exit  of  may  not  be  obstructed. 

United  States  v.  Mosley,  Fed.  Cas.  15823, 15  I.  R.  R.  8. 
Nat.  Banks  not  subject  to  examination.    United  States  v.  Parkhill, 

Fed.  Cas.  No.  15994.    Cf.  United  States  v.  Mann,  95  U.  S. 

580,  24  L.  Ed.  531;  United  States  v.  Rhawn,  Fed.  Cas.  No. 

16150. 
Search  warrants,  duty  of  United  States  Commissioners  to  issue. 

24  Op.  Atty.  Gen.  685. 

Sec.  3178.  All  persons  required  to  make  returns  or 
lists  of  objects  charged  with  an  internal  tax  shall  declare 
therein  whether  the  several  rates  and  amounts  are  stated 
according  to  their  values  in  legal  tender  currency  or  ac- 
cording to  their  values  in  coined  money;  and  in  case  of 


REVISED   STATUTES  129 

neglect  or  refusal  so  to  declare  to  the  satisfaction  of  the 
collector  receiving  such  returns  or  lists,  such  officer  shall 
make  returns  or  lists  for  such  persons  so  neglecting  or 
refusing,  as  in  cases  of  persons  neglecting  or  refusing  to 
make  the  returns  or  lists  required  by  law,  and  the  Com- 
missioner shall  assess  the  tax  thereon,  and  add  thereto 
the  amount  of  penalties  imposed  by  law  in  cases  of  such 
neglect  or  refusal.  And  whenever  the  rates  and  amounts 
contained  in  the  returns  or  lists  are  stated  in  coined  money, 
the  collector  receiving  the  same  shall  reduce  them  to  their 
equivalent  in  legal  tender  currency,  according  to  the  value 
of  such  coined  money  in  said  currency  for  the  time  covered 
by  such  returns. 

Source:    Act  Mar.  10,  1866,  c.  15,  §§  3-4,  14  Stat.  5. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 

Statement  of  provision.  Pacific  Ins.  Co.  v.  Soule,  74  U.  S.  433, 
19  L.  Ed.  95. 

Tax  due  o«  interest,  payable  in  sterling,  to  resident,  must  be  esti- 
mated at  value  in  legal  tender  currency  at  date  when  interest 
was  payable,  and  not  at  date  of  trial  or  judgment.  U.  S.  v. 
5rie  Ry.  Co.,  24  I.  R.  R.  76  (reversed  on  another  ground,  106 
U.  S.  327). 

Sec.  3179.  Whenever  any  person  delivers  or  discloses 
to  the  collector  or  deputy  any  false  or  fraudulent  list, 
return,  account,  or  statement,  with  intent  to  defeat  or 
evade  the  valuation,  enumeration,  or  assessment  intended 
to  be  made,  or,  being  duly  summoned  to  appear  to  testify, 
or  to  appear  and  produce  such  books  as  aforesaid,  neglects 
to  appear  or  to  produce  said  books,  he  shall  be  fined  not 
exceeding  one  thousand  dollars,  or  be  imprisoned  not  ex- 
ceeding one  year,  or  both,  at  the  discretion  of  the  court, 
with  costs  of  prosecution. 

Source:    Act  June  30,  1864,  c.  173,  §  15,  13  Stat.  226. 

Partners  jointly  indictable  for  false  return  signed  by  both.  United 
States  V.  McGinnis,  1  Abb.  (U.  S.)  120,  Fed.  Gas.  15678, 
3  I.  R.  R.  83. 


130  FEDERAL   INCOME   TAX   LAW 

Sec.  3180.  Whenever  there  are  in  any  district  any  ar- 
ticles not  owned  or  possessed  by  or  under  the  care  or  con- 
trol of  any  person  within  such  district,  and  liable  to  be 
taxed,  and  of  which  no  list  has  been  transmitted  to  the 
collector,  as  required  by  law,  the  collector  or  one  of  his 
deputies  shall  enter  the  premises  where  such  articles  are 
situated  and  shall  take  such  view  thereof  as  may  be 
necessary,  and  make  lists  of  the  same,  according  to  the 
form  prescribed.  Said  Hsts,  being  subscribed  by  such 
collector  or  deputy,  shall  be  taken  as  sufficient  lists  of  such 
articles  for  all  purposes. 

Source:    Act  June  30,  1864,  c.  173,  §  16,  13  Stat.  227. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 

Sec.  3181.  The  lists  or  returns  aforesaid  shall,  where 
not  otherwise  specially  provided  for,  be  taken  with  refer- 
ence to  the  day  fixed  for  that  purpose  by  this  Title  as 
aforesaid;  and  where  duties  accrue  at  other  and  different 
times,  the  list  shall  be  taken  with  reference  to  the  time 
when  said  taxes  become  due,  and  shall  be  denominated 
annual,  monthly,  and  special  lists  or  returns. 

Source:    Act  June  30,  1864,  c.  173,  §  18,  13  Stat.  228. 
Act  Feb.  18,  1875,  c.  80,  18  Stat.  319. 

Sec.  3182.  The  Commissioner  of  Internal  Revenue  is 
hereby  authorized  and  required  to  make  the  inquiries, 
determinations,  and  assessments  of  all  taxes  and  penal- 
ties imposed  by  this  Title,  or  accruing  under  any  former 
internal-revenue  act,  where  such  taxes  have  not  been 
duly  paid  by  stamp  at  the  time  and  in  the  manner  pro- 
vided by  law,  and  shall  certify  a  list  of  such  assessments 
when  made  to  the  proper  collectors  respectively,  who  shall 
proceed  to  collect  and  account  for  the  taxes  and  penalties 
so  certified.  Whenever  it  is  ascertained  that  any  list  which 
has  been  or  shall  be  delivered  to  any  collector  is  imperfect 
or  incomplete  in  consequence  of  the  omission  of  the  name 
of  any  person  liable  to  tax,  or  in  consequence  of  any  omis- 
sion, or  understatement,  or  undervaluation,  or  false  or 


REVISED    STATUTES  131 

fraudulent  statement  contained  in  any  return  made  by 
any  person  liable  to  tax,  the  Commissioner  of  Internal 
Revenue  may,  at  any  time  within  fifteen  months  from  the 
time  of  the  delivery  of  the  list  to  the  collector  as  aforesaid, 
enter  on  any  monthly  or  special  list  the  name  of  such  per- 
son so  omitted,  together  with  the  amount  of  tax  for  which 
he  may  have  been  or  shall  become  liable,  and  also  the 
name  of  any  such  person  in  respect  to  whose  return,  as 
aforesaid,  there  has  been  or  shall  be  any  omission,  under- 
valuation, understatement,  or  false  or  fraudulent  state- 
ment, together  with  the  amount  for  which  such  person 
may  be  liable,  above  the  amount  for  which  he  may  have 
been  or  shall  be  assessed  upon  any  return  made  as  afore- 
said; and  he  shall  certify  and  return  such  list  to  the  col- 
lector as  required  by  law.  And  all  provisions  of  law  for  the 
ascertainment  of  liability  to  any  tax,  or  the  assessment 
or  collection  thereof,  shall  be  held  to  apply,  so  far  as  may 
be  necessary,  to  the  proceedings  herein  authorized  and 
directed. 

Source:    Act  June  30,  1864,  c.  173,  §  20,  13  Stat.  229. 
Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  103. 
Act  Dec.  24,  1872,  c.  13,  §  2,  17  Stat.  402. 

Assessment  not  binding  upon  court  in  regard  to  legal  correctness  of 

amount,  etc.    U.  S.  v.  Myers,  3  Hughes,  239,  243,  Fed.  Cas. 

15846,  24  I.  R.  R.  44. 
Assessment,  not  condition  of  liability  for  tax.    King  v.  U.  S.,  99 

U.  S.  229,  25  L.  Ed.  373. 
Assessment  not  binding  upon  third  parties.    U.  S.  v.  Rindskopf,  8 

Biss.  507,  Fed.  Cas.  16166. 
Assessment,  presumption  of  correctness.    U.  S.  v.  Phila.  &  Reading 

R.  R.,  123  U.  S.  113,  31  L.  Ed.  138,  8  S.  Ct.  77. 
Reassessment  for  deficiency.     United  States  v.  O'Neill,  19  Fed. 

567;  Matter  of  Archer,  9  Ben.  427,  Fed.  Cas.  506,  24  I.  R.  R. 

110;  Dandelet  v.  Smith,  18  Wall.  646,  21  L.  Ed.  758. 

Sec.  3183.  It  shall  be  the  duty  of  the  collectors,  or  their 
deputies,  in  their  respective  districts,  and  they  are  author- 
ized, to  collect  all  the  taxes  imposed  by  law,  however 
the  same  may  be  designated.     And  every  collector  and 


132  FEDERAL   INCOME   TAX   LAW 

deputy  collector  shall  give  receipts  for  all  sums  collected 
by  him,  excepting  only  when  the  same  are  in  payment  for 
stamps  sold  and  delivered;  but  no  collector  or  deputy 
collector  shall  issue  a  receipt  in  lieu  of  a  stamp  representing 
a  tax. 

Source:    Act  June  30,  1864,  c.  173,  §§  36-41,  13  Stat.  238-239. 
Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 
Act  March  1,  1879,  c.  125,  §  3,  20  Stat.  331. 

Assessment  by  assessor,  duty  of  collector  to  enforce.    Erskine  v. 

Hornbach,  14  Wall.  613,  20  L.  Ed.  745. 
Taxes  must  be  paid  to  collector,  not  to  Treasury  Department.    4 

I.  R.  R.  156. 

Sec.  3184.  Where  it  is  not  otherwise  provided,  the 
collector  shall  in  person,  or  by  deputy,  within  ten  days 
after  receiving  any  Ust  of  taxes  from  the  Commissioner 
of  Internal  Revenue,  give  notice  to  each  person  liable  to 
pay  any  taxes  stated  therein,  to  be  left  at  his  dwelling  or 
usual  place  of  business,  or  to  be  sent  by  mail,  stating  the 
amount  of  such  taxes,  and  demanding  payment  thereof. 
If  such  person  does  not  pay  the  taxes,  within  ten  days 
after  the  service  or  the  sending  by  mail  of  such  notice,  it 
shall  be  the  duty  of  the  collector  or  his  deputy  to  collect 
the  said  taxes  with  a  penalty  of  five  per  centum  additional 
upon  the  amount  of  taxes,  and  interest  at  the  rate  of  one 
per  centum  a  month. 

Source:  Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  106. 
Act  Mar.  2,  1867,  c.  169,  §  9,  14  Stat.  473. 
Act  Dec.  24,  1872,  c.  13,  §  2,  17  Stat.  402. 

Construction,  strict,  required.    T.  D.,  1651,  Aug.  27,  1910. 
Interest  not  payable  where  amount  of  tax  claimed  has  never  been 

levied.    Lake  Shore  Ry.  Co.  v.  People,  46  Mich.  193,  9  N.  W. 

249,  cited  in  183  U.  S.  544. 
Notice  and  demand  can  be  given  by  mail. 
Notice  and  demand  mailed  to  taxpayer  in  franked  envelope,  ad- 

<dressed  to  principal  business  office,  bearing  collector's  return 

address,  and  not  returned,  presumptively  received.    T.  D., 

1773,  May  21,  1912. 


REVISED   STATUTES  133 

Notice  and  demand  not  necessary  for  assessment,  but  necessary 
for  imposition  of  5%  penalty.  United  States  v.  Bristow,  20 
Fed.  378;  United  States  v.  Allen,  14  Fed.  263.  Cf.  Clay  v. 
Swope,  38  Fed.  396. 

Notice  and  demand  not  received  by  reason  of  delay  in  mail.  Pen- 
alty not  imposed  if  tax  paid  in  full  within  ten  days  of  actual 
receipt.   T.  D.,  1659,  Oct.  20, 1910;  T.  D.,  1675,  Feb.  14, 1911. 

Penalty  for  non-payment,  annulled  by  repeal  of  act,  cannot  be  re- 
vived by  new  act.   State  v.  Jersey  City,  37  N.  J.  L.  39. 

Payment  must  be  actually  made  to  avoid  penalty.  T.  D.,  1651, 
Aug.  27,  1910. 

Penalty,  single,  only,  for  all  failures  to  make  returns  prior  to  com- 
mencement of  action  to  recover.  U.  S.  v.  Bklyn.  &c.  R.  R., 
14  Fed.  284;  U.  S.  v.  N.  Y.  Guaranty  Co.,  8  Ben.  269,  Fed. 
Cas.  15872. 

Interest  not  payable  in  default  of  assessment.  Lake  Shore,  etc., 
Ry.  V.  People,  46  Mich.  193,  9  N.  W.  249;  Ex  parte  Wilder's 
S.  S.  Co.,  183  U.  S.  545,  46  L.  Ed.  321,  22  S.  Ct.  225. 

Notice  and  demand  must  specify  amount  of  tax,  and  be  in  writing. 
U.  S.  V.  Allen  et  al.,  14  Fed.  267,  citing  4  Dillon,  71. 

Sec.  3185.  All  returns  required  to  be  made  monthly  by 
any  person  liable  to  tax  shall  be  made  on  or  before,  the 
tenth  day  of  each  month,  and  the  tax  assessed  or  due 
thereon  shall  be  returned  by  the  Commissioner  of  Internal 
Revenue  to  the  collector  on  or  before  the  last  day  of  each 
month.  All  returns  for  which  no  provision  is  otherwise 
made  shall  be  made  on  or  before  the  tenth  day  of  the 
month  succeeding  the  time  when  the  tax  is  due  and  liable 
to  be  assessed,  and  the  tax  thereon  shall  be  returned  as 
herein  provided  for  monthly  returns,  and  shall  be  due  and 
payable  on  or  before  the  last  day  of  the  month  in  which 
the  assessment  is  so  made.  When  the  said  tax  is  not  paid 
on  or  before  the  last  day  of  the  month,  as  aforesaid,  the 
collector  shall  add  a  penalty  of  five  per  centum  together 
with  interest  at  the  rate  of  one  per  centum  per  month, 
upon  such  tax  from  the  time  the  same  became  due;  but 
no  interest  for  a  fraction  of  a  month  shall  be  demanded: 
Provided,  That  notice  of  the  time  when  such  tax  becomes 
due  and  payable  is  given  in  such  manner  as  may  be  pre- 


134  FEDERAL  INCOME  TAX  LAW 

scribed  by  the  Commissioner  of  Internal  Revenue.  It 
shall  then  be  the  duty  of  the  collector,  in  case  of  non- 
payment of  said  tax  on  or  before  the  last  day  of  the  month 
as  aforesaid,  to  demand  payment  thereof,  with  five  per 
centum  added  thereto,  and  interest  at  the  rate  of  one 
per  centum  per  month,  as  aforesaid,  in  the  manner  pre- 
scribed by  law;  and  if  said  tax,  penalty,  and  interest  are 
not  paid  within  ten  days  after  such  demand,  it  shall  be 
lawful  for  the  collector  or  his  deputy  to  make  distraint 
therefor,  as  provided  by  law. 

Source:    Act  July  13,  1866,  c.  184,  §  11,  14  Stat.  150. 
Act  Mar.  2,  1867,  c.  169,  §  8,  14  Stat.  473. 
Act  Dec.  24,  1872,  c.  13,  §§  1-2,  17  Stat.  401-402. 

Payment  by  agent  sufficient.   U.  S.  v.  Lee,  106  U.  S.  196,  27  L.  Ed. 

171,  1  S.  Ct.  24;  Atwood  v.  Weems,  99  U.  S.  183,  25  L.  Ed. 

471;  Bennett  v.  Hunter,  9  Wall.  326,  19  L.  Ed.  672;  Lee 

V.  Chase,  1  Hughes,  402,  Fed.  Cas.  8185. 
Tender  by  agent  unnecessary  in  case  of  collector's  rule  to  receive 

tax  only  from  principal.    U.  S.  v.  Lee,  106  U.  S.  196,  27  L.  Ed. 

171,  1  S.  Ct.  240;  Atwood  v,  Weems,  99  U.  S.  183,  25  L.  Ed. 

471;  Bennett  v.  Hunter,  9  Wall.  326,  19  L.  Ed.  672;  Lee  v. 

Chase,  1  Hughes,  402,  Fed.  Cas.  8185. 
Tender  of  payment,  by  relative,  of  tax  due  upon  property  adver- 
tised for  sale  is  sufficient.    Tacey  v.  Irwin,  18  Wall.  549, 

21  L.  Ed.  786. 

Sec.  3186.  If  any  person  liable  to  pay  any  tax  neglects 
or  refuses  to  pay  the  same  after  demand,  the  amount 
shall  be  a  Hen  in  favor  of  the  United  States  from  the  time 
when  the  assessment  list  was  received  by  the  collector, 
except  when  otherwise  provided,  until  paid,  with  the 
interest,  penalties,  and  costs  that  may  accrue  in  addition 
thereto,  upon  all  property  and  rights  to  property  belong- 
ing to  such  person. 

Source.    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  107. 
Act  Mar.  1,  1879,  c.  125,  §  3,  20  Stat.  331. 

Actions,  see  also  §  3207. 

Demand  for  return,  only,  not  sufficient  basis  for  lien.    U.  S.  v. 
Pac.  R.  R.,  4  Dill.  71,  Fed.  Cas.  15983. 


REVISED   STATUTES  135 

Forfeiture,  time  of  taking  effect.    U.  S.  v.  04  Barrels  of  Distilled 

Spirits,  3  Clifif.  308,  Fed.  Cas.  16306. 
Innocent  purchaser,  status  of  forfeiture  against.    U.  S.  v.  64  Bar- 
rels of  Distilled  Spirits,  3  Cliff.  308,  Fed.  Cas.  16306. 
Innocent  purchaser,  taking  conveyance  after  filing  of  list  with 

^collector  and  demand  upon  taxpayer  is  bound  by  lien.   United 

States  V.  Curry,  201  Fed.  371;  Alkan  v.  Bean,  8  Biss.  83,  Fed, 

Cas.  202. 
Lien,  assessment  condition  precedent  to.    United  States  v.  Pac. 

R.  R.  Co.,  1  Fed.  100. 
Lien  not  displaced  by  sale  under  prior  judgment.    Osterberg  v. 

Union  Trust  Co.,  93  U.  S.  424,  23  L.  Ed.  964. 
Lien,  notice  and  demand  and  neglect  or  refusal  to  pay,  prerequisite 

to.    Brown  v.  Goodwin,  75  N.  Y.  409;  United  States  v.  Pacific 

R.  Co.,  4  Dill.  71,  Fed.  Cas.  15983. 
Lien,  property  which  is  subject  to,  is  that  owned  by  taxpayer  at 

time  of  demand.    U.  S.  v.  Pac.  Ry.  Co.,  1  Fed.  97. 
Lien  cannot  be  displaced  under  any  provision  of  state  statutes, 

as,  e.  g.,  by  sale  under  prior  mortgage,  judgment,  or  decree. 

Osterberg  v.  Union  Trust  Co.,  93  U.  S.  424,  23  L.  Ed.  964. 
Lien,  status  of  with  respect  to  state  law.    U.  S.  v.  Snyder,  149 

U.  S.  210,  37  L.  Ed.  705,  13  S.  Ct.  846. 
Lien,  having  accrued,  relates  back  to  time  when  tax  became  due. 

U.  S.  V.  Pac.  Ry.  Co.,  1  Fed.  97;  U.  S.  v.  Curry,  201  Fed.  371. 
Non-payment,  see  Lien. 
Notice  and  demand,  see  Lien. 
Remedy,  see  State  Statutes. 
State  Statutes,  remedies  given  by,  may  be  enforced  in  federal 

courts.     U.  S.  V.  Wilson,  118  U.  S.  86,  30  L.  Ed.  110,  6  S.  Ct. 

991. 

Sec.  3187.  If  any  person  liable  to  pay  any  taxes  refuses 
or  neglects  to  pay  the  same  within  ten  days  after  notice 
and  demand,  it  shall  be  lawful  for  the  collector  or  his 
deputy  to  collect  the  said  taxes,  with  five  per  centum 
additional  thereto,  and  interest  as  aforesaid,  by  distraint 
and  sale,  in  the  manner  hereafter  provided,  of  the  goods, 
chattels,  or  effects,  including  stocks,  securities,  and  evi- 
dences of  debt,  of  the  person  delinquent  as  aforesaid: 
Provided,  That  there  shall  be  exempt  from  distraint  and 
sale,  if  belonging  to  the  head  of  a  family,  the  school- 
books,  and  wearing  apparel  necessary  for  such  family; 


136  FEDERAL   INCOME   TAX   LAW 

also  arms  for  personal  use,  one  cow,  two  hogs,  five  sheep 
and  the  wool  thereof,  provided  the  aggregate  market 
value  of  said  sheep  shall  not  exceed  fifty  dollars;  the 
necessary  food  for  such  cow,  hogs,  and  sheep,  for  a  period 
not  exceeding  thirty  days;  fuel  to  an  amount  not  greater 
in  value  than  twenty-five  dollars;  provisions  to  an  amount 
not  greater  than  fifty  dollars;  household  furniture  kept 
for  use  to  an  amount  not  greater  than  three  hundred  dol- 
lars; and  the  books,  tools,  or  implements  of  a  trade  or  pro- 
fession to  an  amount  not  greater  than  one  hundred  dollars, 
shall  also  be  exempt;  and  the  officer  making  the  distraint 
shall  summon  three  disinterested  householders  of  the  vicin- 
ity, who  shall  appraise  and  set  apart  to  the  owner  the 
amount  of  property  herein  declared  to  be  exempt. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  *106-107-108. 
Act  Mar.  2,  1867,  c.  169,  §  8,  14  Stat.  473. 
Distraint  and  sale  vest  in  purchaser  taxpayer's  interest  in  prop- 
erty at  time  of  demand,  and  divest  all  interests  subsequently 
derived  from  taxpayer.    Blacklock,  Executor,  v.  U.  S.,  208 
U.  S.  75,  52  L.  Ed.  396. 
Distraint,  right  of,  concurrent  with  right  to  foreclose  lien  in  equity. 
Blacklock,  Executor,  v.  U.  s!,  208  U.  S.  75,  52  L.  Ed.  396. 

Sec.  3188.  In  such  case  of  neglect  or  refusal,  the  col- 
lector may  levy,  or  by  warrant  may  authorize  a  deputy 
collector  to  levy,  upon  all  property  and  rights  to  property, 
except  such  as  are  exempt  by  the  preceding  section, 
belonging  to  such  person,  or  on  which  the  said  lien  exists, 
for  the  payment  of  the  sum  due  as  aforesaid  with  interest 
and  penalty  for  non-payment,  and  also  of  such  further 
sum  as  shall  be  sufficient  for  the  fees,  costs,  and  expenses 
of  such  levy. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  107. 

Assessment,  sufficient  ground  for  distraint.    Harding  v.  Woodcock, 

137  U.  S.  43,  34  L.  Ed.  580,  11  S.  Ct.  6. 
Replevin,  not  sustainable  in  case  of  distrained  property.    Strong 

V.  Walton,  47  A.  D.  114,  62  N.  Y.  S.  353. 
Warrants,  regular  on  face,  sufficient  protection  to  collector.    L.  S. 

&  M.  S.  Ry.  Co.  V.  Roach,  80  N.  Y.  339. 


REVISED    STATUTES  137 

Sec.  3189.  All  persons,  and  officers  of  companies  or 
corporations,  are  required,  on  demand  of  a  collector  or 
deputy  collector  about  to  distrain  or  having  distrained 
on  any  property,  or  rights  of  property,  to  exhibit  all 
books  containing  evidence  or  statements  relating  to  the 
subject  of  distraint,  or  the  property  or  rights  of  property 
liable  to  distraint  for  the  tax  due  as  aforesaid. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  107. 

Sec.  3190.  When  distraint  is  made,  as  aforesaid,  the 
officer  charged  with  the  collection  shall  make  or  cause  to 
be  made  an  account  of  the  goods  or  effects  distrained,  a 
copy  of  which,  signed  by  the  officer  making  such  dis- 
traint, shall  be  left  with  the  owner  or  possessor  of  such 
goods  or  effects,  or  at  his  dwelling  or  usual  place  of  busi- 
ness, with  some  person  of  suitable  age  and  discretion,  if 
any  such  can  be  found,  with  a  note  of  the  sum  demanded, 
and  the  time  and  place  of  sale;  and  the  said  officer  shall 
forthwith  cause  a  notification  to  be  published  in  some 
newspaper  within  the  county  wherein  said  distraint  is 
made,  if  a  newspaper  is  published  in  said  county,  or  to  be 
publicly  posted  at  the  post-office,  if  there  be  one  within 
five  miles  nearest  to  the  residence  of  the  person  whose 
property  shall  be  distrained,  and  in  not  less  than  two  other 
public  places.  Such  notice  shall  specify  the  articles 
distrained,  and  the  time  and  place  for  the  sale  thereof. 
Such  time  shall  not  be  less  than  ten  nor  more  than  twenty 
days  from  the  date  of  such  notification  to  the  owner  or 
possessor  of  the  property  and  the  publication  or  posting 
of  such  notice  as  herein  provided,  and  the  place  proposed 
for  the  sale  shall  not  be  more  than  five  miles  distant 
from  the  place  of  making  such  distraint.  Said  sale  may 
be  adjourned  from  time  to  time  by  said  officer,  if  he  deems 
it  advisable,  but  not  for  a  time  to  exceed  in  all  thirty  days. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  107. 

Agent,  payment  by  sufficient.    U.  S.  v.  Lee,  106  U.  S.  196,  27 
L.  Ed.  171,  1  S.  Ct.  24;  Atwood  v.  Weems,  99  U.  S.  183,  25 


138  FEDERAL  IKCOME  TAX  LAW 

L.  Ed.  471;  Bennett  v.  Hunter,  9  Wall.  326,  19  L.  Ed.  672; 

Lee  V.  Chase,  1  Hughes,  402,  Fed.  Cas.  8185 
Agent,  tender  by  unnecessary  where  collector  has  made  rule  to 

receive  taxes  only  from  principal.    U.  S.  v.  Lee,  106  U.  S.  196, 

27  L.  Ed.  171,  1  S.  Ct.  24;  Atwood  v.  Weems,  99  U.  S.  183, 

25  L.  Ed.  471;  Bennett  v.  Hunter,  9  Wall.  326,  19  L.  Ed.  672; 

Lee  V.  Chase,  1  Hughes,  402,  Fed.  Cas.  8185. 
Sale,  see  Agent. 
Sale,  not  a  trespass  when  collector  acts  under  proper  warrant 

from  assessor.    Haffin  v.  Mason,  15  Wall.  671,  21  L.  Ed.  196. 
Tender  of  payment — Relative's  tender  of  payment,  or  visit  to 

collector  for  such  purpose,  etc.,  sufl&cient.    Tacey  v.  Irwin, 

18  Wall.  549,  21  L.  Ed.  786. 

Sec.  3191.  When  property  subject  to  tax,  but  upon 
which  the  tax  has  not  been  paid,  is  seized  upon  distraint 
and  sold,  the  amount  of  such  tax  shall,  after  deducting 
the  expenses  of  such  sale,  be  first  appropriated  out  of  the 
proceeds  thereof  to  the  payment  of  the  tax.  And  if  no 
assessment  of  such  tax  has  been  made  upon  such  property, 
the  collector  shall  make  a  return  thereof  in  the  form  re- 
quired by  law,  and  the  Commissioner  of  Internal  Revenue 
shall  assess  the  tax  thereon. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 
Act  Dec.  24,  1874,  c.  13,  §  2,  17  Stat.  402. 

Sec.  3192.  When  any  property  advertised  for  sale 
under  distraint,  as  aforesaid,  is  of  a  kind  subject  to  tax, 
and  the  tax  has  not  been  paid,  and  the  amount  bid  for 
such  property  is  not  equal  to  the  amount  of  the  tax,  the 
collector  may  purchase  the  same  in  behalf  of  the  United 
States  for  an  amount  not  exceeding  the  said  tax.  All 
property  so  purchased  may  be  sold  by  the  collector,  under 
such  regulations  as  may  be  prescribed  by  the  Commis- 
sioner of  Internal  Revenue.  The  collector  shall  render  to 
the  Commissioner  a  distinct  account  of  all  charges  in- 
curred in  such  sales,  and,  in  case  of  sale,  shall  pay  into  the 
Treasury  the  surplus,  if  any  there  be,  after  defraying  all 
charges  and  fees. 
Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 


REVISED   STATUTES  139 

Sec.  3193.  In  any  case  of  distraint  for  the  payment  of 
the  taxes  aforesaid,  the  goods,  chattels,  or  effects  so  dis- 
trained shall  be  restored  to  the  owner  or  possessor,  if, 
prior  to  the  sale,  payment  of  the  amount  due  is  made  to 
the  proper  officer  charged  with  the  collection,  together 
with  the  fees  and  other  charges;  but  in  case  of  non- 
payment as  aforesaid,  the  said  officers  shall  proceed  to  sell 
the  said  goods,  chattels,  or  effects  at  public  auction,  and 
shall  retain  from  the  proceeds  of  such  sale  the  amount  de- 
mandable  for  the  use  of  the  United  States,  and  a  com- 
mission of  five  per  centum  thereon  for  his  own  use,  with 
the  fees  and  charges  for  distraint  and  sale,  rendering  the 
overplus,  if  any  there  be,  to  the  person  who  may  be  entitled 
to  receive  the  same. 

Smirce:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  106. 

Sec.  3194.  In  all  cases  of  sale,  as  aforesaid,  the  certifi- 
cate of  such  sale  shall  be  prima  facie  evidence  of  the  right 
of  the  officer  to  make  such  sale,  and  conclusive  evidence 
of  the  regularity  of  his  proceedings  in  making  the  sale, 
and  shall  transfer  to  the  purchaser  all  right,  title,  and 
interest  of  such  delinquent  in  and  to  the  property  sold; 
and  where  such  property  consists  of  stocks,  said  certificate 
shall  be  notice,  when  received,  to  any  corporation,  com- 
pany, or  association  of  said  transfer,  and  shall  be  authority 
to  such  corporation,  company,  or  association  to  record  the 
same  on  their  books,  and  records  in  the  same  manner  as 
if  transferred  or  assigned  by  the  party  holding  the  same, 
in  lieu  of  any  original  or  prior  certificates,  which  shall  be 
void,  whether  cancelled  or  not.  And  said  certificates, 
where  the  subject  of  sale  is  securities  or  other  evidences 
of  debt,  shall  be  good  and  valid  receipts  to  the  person 
holding  the  same,  as  against  any  person  holding,  or  claim- 
ing to  hold,  possession  of  such  securities  or  other  evidences 
of  debt. 

Smirce:    Act  June  30,  1864,  c.  173,  §  45,  13  Stat.  240. 
Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  107. 


140  FEDERAL  INCOME  TAX  LAW 

Sale  by  distraint  distinguishable  from  seizure  and  condemnation 
in  forfeiture  proceedings.    Sheridan  v.  Allen,  153  Fed.  568. 

Title  of  third  person  not  affected  by  sale.  Sheridan  v.  Allen,  153 
Fed.  568. 

Sec.  3195.  When  any  property  liable  to  distraint  for 
taxes  is  not  divisible,  so  as  to  enable  the  collector  by  a 
sale  of  part  thereof  to  raise  the  whole  amount  of  the  tax, 
with  all  cost,  charges,  and  comnjissions,  the  whole  of  such 
property  shall  be  sold,  and  the  surplus  of  the  proceeds  of 
the  sale,  after  satisfying  the  tax,  costs,  and  charges,  shall 
be  paid  to  the  person  legally  entitled  to  receive  the  same; 
or,  if  he  cannot  be  found,  or  refuses  to  receive  the  same, 
shall  be  deposited  in  the  Treasury  of  the  United  States, 
to  be  there  held  for  his  use  until  he  makes  application 
therefor  to  the  Secretary  of  the  Treasury,  who,  upon  such 
application  and  satisfactory  proofs  in  support  thereof, 
shall,  by  warrant  on  the  Treasury,  cause  the  same  to  be 
paid  to  the  appUcant. 
Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 

Collector  has  reasonable  discretion  as  to  division  or  non-division 
of  property  upon  tax  sale.  Springer  v.  U.  S.,  102  U.  S.  586, 
26  L.  Ed.  253. 

Sec.  3196.  When  goods,  chattels,  or  effects  sufficient 
to  satisfy  the  taxes  imposed  upon  any  person  are  not 
found  by  the  collector  or  deputy  collector,  he  is  authorized 
to  collect  the  same  by  seizure  and  sale  of  real  estate. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 

See  also,  §  3188. 

Failure  to  find  personal  property  a  condition  precedent  to  seizure 
and  sale  of  real  estate.    Brown  v.  Goodwin,  75  N.  Y.  409. 

Sec.  3197.  The  officer  making  the  seizure  mentioned 
in  the  preceding  section  shall  give  notice  to  the  person 
whose  estate  it  is  proposed  to  sell  by  giving  him  in  hand, 
or  leaving  at  his  last  or  usual  place  of  abode,  if  he  has  any 
such  within  the  collection-district  where  said  estate  is 


REVISED    STATUTES  141 

situated,  a  notice,  in  writing,  stating  what  particular 
estate  is  to  be  sold,  describing  the  same  with  reasonable 
certainty,  and  the  time  when  and  place  where  said  officer 
proposes  to  sell  the  same;  which  time  shall  not  be  less  than 
twenty  nor  more  than  forty  days  from  the  time  of  giving 
said  notice.  The  said  officer  shall  also  cause  a  notification 
to  the  same  effect  to  be  published  in  some  newspaper 
within  the  county  where  such  seizure  is  made,  if  any  such 
there  be,  and  shall  also  cause  a  like  notice  to  be  posted 
at  the  post-office  nearest  to  the  estate  seized,  and  in  two 
other  public  places  within  the  county;  and  the  place  of 
said  sale  shall  not  be  more  than  five  miles  distant  from 
the  estate  seized,  except  by  special  order  of  the  Commis- 
sioner of  Internal  Revenue.  At  the  time  and  place  ap- 
pointed, the  officer  making  such  seizure  shall  proceed  to 
sell  the  said  estate  at  public  auction,  offering  the  same 
at  a  minimum  price,  including  the  expense  of  making 
such  levy,  and  all  charges  for  advertising  and  an  officer's 
fee  of  ten  dollars.  When  the  real  estate  so  seized  consists 
of  several  distinct  tracts  or  parcels,  the  officer  making 
sale  thereof  shall  offer  each  tract  or  parcel  for  sale  sepa- 
rately, and  shall,  if  he  deem  it  advisable,  apportion  the 
expenses,  charges,  and  fees  aforesaid  to  such  several  tracts 
or  parcels,  or  to  any  of  them,  in  estimating  the  minimum 
price  aforesaid.  If  no  person  offers  for  said  estate  the 
amount  of  said  minimum  price,  the  officer  shall  declare 
the  same  to  be  purchased  by  him  for  the  United  States; 
otherwise  the  same  shall  be  declared  to  be  sold  to  the 
highest  bidder.  And  in  case  the  same  shall  be  declared  to 
be  purchased  for  the  United  States,  the  officer  shall  immedi- 
ately transmit  a  certificate  of  the  purchase  to  the  Commis- 
sioner of  Internal  Revenue,  and,  at  the  proper  time,  as 
hereafter  provided,  shall  execute  a  deed  therefor,  after  its 
preparation  and  the  indorsement  of  approval  as  to  its  form 
by  the  United  States  district  attorney  for  the  district  in 
which  the  property  is  situate,  and  shall  without  delay 
cause  the  same  to  be  duly  recorded  in  the  proper  registry 


142  FEDERAL  INCOME  TAX  LAW 

of  deeds,  and  immediately  thereafter  shall  transmit  such 
deed  to  the  Commissioner  of  Internal  Revenue.  And 
said  sale  may  be  adjourned  from  time  to  time  by  said 
oJSicer  for  not  exceeding  thirty  days  in  all,  if  he  shall 
think  it  advisable  so  to  do.  If  the  amount  bid  shall  not 
be  then  and  there  paid,  the  officer  shall  forthwith  proceed 
to  again  sell  said  estate  in  the  same  manner.  And  it  is 
hereby  provided,  That  all  certificates  of  purchase,  and 
deeds  of  property  purchased  by  the  United  States  under 
the  internal-revenue  laws,  on  sales  for  taxes,  or  under  exe- 
cutions issued  from  the  United  States  courts,  which  now 
are,  or  hereafter  may  be,  found  in  the  office  of  any  collec- 
tor. United  States  marshal,  or  United  States  district 
attorney,  shall  be  immediately  transmitted  by  such  offi- 
cers respectively  to  the  Commissioner  of  Internal  Revenue. 
And  it  is  hereby  further  provided.  That  for  the  preparation 
and  approval  by  the  United  States  district  attorney  of 
each  deed  as  above  required,  a  fee  of  five  dollars  shall  be 
allowed  to  that  officer,  to  be  paid  by  the  United  States, 
and  which  he  shall  account  for  in  his  emolument  returns. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108-109. 
Act  Feb.  27,  1877,  c.  69,  19  Stat.  248. 
Act  Mar.  1,  1879,  c.  125,  §  3,  20  Stat.  331. 

Discretion  of  collector  as  to  division  of  property.  Springer  v. 
U.  S.,  102  U.  S.  586,  26  L.  Ed.  253. 

Real  property,  seizure  of,  effected  by  making  memorandum  on 
warrant  of  description  of  property  for  levy  and  sale.  Entry 
not  necessary.    U.  S.  v.  Hess,  5,Saw.  533,  Fed.  Cas.  15358. 

Sec.  3198.  Upon  any  sale  of  real  estate,  as  provided 
in  the  preceding  section,  and  the  payment  of  the  purchase- 
money,  the  officer  making  the  seizure  and  sale  shall  give 
to  the  purchaser  a  certificate  of  purchase,  which  shall  set 
forth  the  real  estate  purchased,  for  whose  taxes  the  same 
was  sold,  the  name  of  the  purchaser  and  the  price  paid 
therefor;  and  if  the  said  real  estate  be  not  redeemed  in 
the  manner  and  within  the  time  hereafter  provided,  the 
said  collector  or  deputy  collector  shall  execute  to  the  said 


REVISED   STATUTES  143 

purchaser,  upon  his  surrender  of  said  certificate,  a  deed 
of  the  real  estate  purchased  by  him  as  aforesaid,  reciting 
the  facts  set  forth  in  said  certificate,  and  in  accordance 
with  the  laws  of  the  State  in  which  such  real  estate  is 
situate  upon  the  subject  of  sales  of  real  estate  under  ex- 
ecution. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  109. 

Certificate  merely  memorandum  of  purchaser's  right  to  deed. 
Flemister  v.  Flemister,  83  Ga.  79, 9  S.  E.  724. 

Sec.  3199.  The  deed  of  sale  given  in  pursuance  of  the 
preceding  section  shall  be  prima  facie  evidence  of  the  facts 
therein  stated;  and  if  the  proceedings  of  the  officer  as 
set  forth  have  been  substantially  in  accordance  with  the 
provisions  of  law,  shall  be  considered  and  operate  as  a  con- 
veyance of  all  the  right,  title,  and  interest  the  party  de- 
linquent had  in  and  to  the  real  estate  thus  sold  at  the 
time  the  lien  of  the  United  States  attached  thereto. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  109. 

Deed,  prima  facie  evidence  only  of  facts  required  by  act  to  be 
stated.  Fox  v.  Stafford,  90  N.  C.  296;  Brown  v.  Goodwin,  75 
N.  Y.  409. 

Notice — Any  purchaser,  including  the  United  States,  has  con- 
structive notice  by  this  section  that  only  the  interest  of  the 
delinquent  party  is  sold.  United  States  v.  Triplett,  Fed.  Cas. 
16539,  22  I.  R.  R.  207,  3  Cent.  L.  J.  399. 

Title,  character  of,  taken  by  purchaser,  only  that  of  title  of  de- 
linquent. Osterberg  v.  Union  Trust  Co.,  93  U.  S.  424,  23 
L.  Ed.  964;  United  States  v.  Triplett,  Fed.  Cas.  No.  16539. 

Title  passing  by  sale  of  leased  distillery  to  satisfy  penalty  against 
lessee,  is  only  that  of  lessee.  Mansfield  v.  Excelsior  Refining 
Co.,  135  U.  S.  326,  34  L.  Ed.  162,  10  S.  Ct.  825. 

Sec.  3200.  Any  collector  or  deputy  collector  may,  for 
the  collection  of  taxes  imposed  upon  any  person,  and 
committed  to  him  for  collection,  seize  and  sell  the  lands 
of  such  person  situated  in  any  other  collection-district 
within  the  state  in  which  such  officer  resides;  and  his  pro- 


144  FEDERAL  INCOME  TAX  LAW 

ceedings  in  relation  thereto  shall  have  the  same  effect 
as  if  the  same  were  had  in  his  proper  collection-district. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 

Sec.  3201.  Any  person  whose  estate  may  be  proceeded 
against  as  aforesaid  shall  have  the  right  to  pay  the  amount 
due,  together  with  the  costs  and  charges  thereon,  to  the 
collector  or  deputy  collector  at  any  time  prior  to  the  sale 
thereof,  and  all  further  proceedings  shall  cease  from  the 
time  of  such  payment. 
Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  109. 

Sec.  3202.  The  owners  of  any  real  estate  sold  as  afore- 
said, their  heirs,  executors,  or  administrators,  or  any 
person  having  any  interest  therein,  or  a  lien  thereon,  or 
any  person  in  their  behalf,  shall  be  permitted  to  redeem 
the  land  sold,  or  any  particular  tract  thereof,  at  any  time 
within  one  year  after  the  sale  thereof,  upon  payment  to 
the  purchaser,  or,  in  case  he  cannot  be  found  in  the  county 
in  which  the  land  to  be  redeemed  is  situate,  then  to  the 
collector  of  the  district  in  which  the  land  is  situate,  for  the 
use  of  the  purchaser,  his  heirs  or  assigns,  the  amount  paid 
by  the  said  purchaser  and  interest  thereon  at  the  rate  of 
twenty  per  centum  per  annum. 
Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  109. 

Sec.  3203.  It  shall  be  the  duty  of  every  collector  to 
keep  a  record  of  all  sales  of  land  made  in  his  collection- 
district,  whether  by  himself  or  his  deputies,  or  by  another 
collector,  in  which  shall  be  set  forth  the  tax  for  which  any 
such  sale  was  made,  the  dates  of  seizure  and  sale,  the  name 
of  the  party  assessed  and  all  proceedings  in  making  said 
sale,  amount  of  fees  and  expenses,  the  name  of  the  pur- 
chaser, and  the  date  of  the  deed ;  and  said  record  shall  be 
certified  by  the  officer  making  the  sale.  And  on  or  be- 
fore the  fifth  day  of  each  succeeding  month  he  shall 
transmit  a  copy  of  such  record  of  the  preceding  month  to 
the  Commissioner  of  Internal  Revenue.    And  it  shall  be 


REVISED    STATUTES  145 

the  duty  of  every  deputy  making  sale,  as  aforesaid,  to 
return  a  statement  of  all  his  proceeding?  to  the  collector, 
and  to  certify  the  record  thereof.  In  case  of  the  death 
or  removal  of  the  collector,  or  the  expiration  of  his  term 
of  office  from  any  other  cause,  said  record  shall  be  delivered 
to  his  successor  in  office;  and  a  copy  of  every  such  record, 
certified  by  the  collector,  shall  be  evidence  in  any  court 
of  the  truth  of  the  facts  therein  stated. 

-Source;    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 

Act  March  1,  1879,  c.  125,  §  3,  20  Stat.  332. 

Sec.  3204.  When  any  lands  sold,  as  aforesaid,  are  re- 
deemed as  heretofore  provided,  the  collector  shall  make 
entry  of  the  fact  upon  the  record  mentioned  in  the  pre- 
ceding section,  and  the  said  entry  shall  be  evidence  of 
such  redemption. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 

Sec.  3205.  Whenever  any  property,  personal  or  real, 
which  is  seized  and  sold  by  virtue  of  the  foregoing  pro- 
visions, is  not  sufficient  to  satisfy  the  claim  of  the  United 
States  for  which  distraint  or  seizure  is  made,  the  collector 
may,  thereafter,  and  as  often  as  the  same  may  be  necessary 
proceed  to  seize  and  sell,  in  like  manner,  any  other  prop- 
erty liable  to  seizure  of  the  person  against  whom  such 
claim  exists,  until  the  amount  due  from  him,  together 
with  all  expenses,  is  fully  paid. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 

Sec.  3206.  The  Commissioner  of  Internal  Revenue  shall 
by  regulation  determine  the  fees  and  charges  to  be  allowed 
in  all  cases  of  distraint  and  other  seizures;  and  shall  have 
power  to  determine  whether  any  expense  incurred  in  mak- 
ing any  distraint  or  seizure  was  necessary. 

Smirce:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  108. 

Sec.  3207.  In  any  case  where  there  has  been  a  refusal  or 
neglect  to  pay  any  tax,  and  it  has  become  necessary  to 


146  FEDERAL   INCOME   TAX   LAW 

seize  and  sell  real  estate  to  satisfy  the  same,  the  Com- 
missioner of  Internal  Revenue  may  direct  a  bill  in  chancery 
to  be  filed,  in  a  district  or  circuit  court  of  the  United 
States,  to  enforce  the  hen  of  the  United  States  for  tax  upon 
any  real  estate,  or  to  subject  any  real  estate  owned  by 
the  deUnquent,  or  in  which  he  has  any  right,  title,  or  in- 
terest, to  the  payment  of  such  tax.  All  persons  having 
liens  upon  or  claiming  any  interest  in  the  real  estate 
sought  to  be  subjected  as  aforesaid  shall  be  made  parties 
to  such  proceedings,  and  be  brought  into  court  as  pro- 
vided in  other  suits  in  chancery  therein.  And  the  said 
court  shall,  at  the  term  next  after  the  parties  have  been 
duly  notified  of  the  proceedings,  unless  otherwise  ordered 
by  the  court,  proceed  to  adjudicate  all  matters  involved 
therein,  and  finally  determine  the  merits  of  all  claims  to 
and  hens  upon  the  real  estate  in  question,  and,  in  all  cases 
where  a  claim  or  interest  of  the  United  States  therein  is 
established,  shall  decree  a  sale  of  such  real  estate,  by  the 
proper  officer  of  the  court,  and  a  distribution  of  the  proceeds 
of  such  sale  according  to  the  findings  of  the  court  in  re- 
spect to  the  interests  of  the  parties  and  of  the  United  States. 

Source:  Act  July  20,  1868,  c.  186,  §  106,  15  Stat.  167. 

Corporation,  dissolving  within  tax  year,  assets  of,  if  distributed 
•  before  list  comes  into  collector's  hands,  may  be  followed  in 

equity  by  United  States  as  by  any  other  creditor.  If  dis- 
tributed after  such  time,  are  impressed  with  lien  in  hands 
of  persons  other  than  bona  fide  purchasers.  T.  D.,  1615, 
April  15,  1910,  28  Op.  Atty.  Gen.  241. 

Laches,  defense  of  not  applicable  against  United  States.  U.  S.  v. 
Thompson,  98  U.  S.  486,  25  L.  Sd.  194;  U.  S.  v.  Insley,  130 
U.  S.  263,  32  L.  Ed.  968,  9  S.  Ct.  485;  U.  S.  v.  Beebe,  127 
U.  S.  338, 32  L.  Ed.  121,  8  S.  Ct.  1083. 

Lien,  foreclosure  of  in  equity,  necessary  to  cut  off  lessor's  right 
in  rented  property  sold  by  distraint.  Mansfield  v.  Excelsior 
Refining  Co.,  135  U.  S.  326,  34  L.  Ed.  162,  10  S.  Ct.  825. 

Lien,  right  to  foreclose  in  equity,  concurrent  with  right  of  distraint. 
Blacklock,  Executor,  v.  U.  S.,  208  U.  S.  75,  52  L.  Ed.  396. 

Limitations,  statute  of,  not  applicable  to  United  States.  U.  S. 
V,  Thompson,  98  U.  S.  486,  25  L.  Ed.  194;  U.  S.  v.  Insley,  130 


REVISED   STATUTES  147 

/' 

U.  S.  263,  32  L.  Ed.  968,  9  S.  Ct.  485;  U.  S.  v.  Beebe,  127 
U.  S.  338,  32  L.  Ed.  121,  8  S.  Ct.  1083. 
Sale  of  personal  property  not  condition  precedent  to  suit  to  enforce 
lien  against  real  property.    U.  S.  Comp.  Stat.  1901,  p.  2073. 

Sec.  3208.  The  Commissioner  of  Internal  Revenue  shall 
have  charge  ot  all  real  estate  which  is  now  or  shall  become 
the  property  of  the  United  States  by  judgment  of  for- 
feiture under  the  internal  revenue  laws,  or  which  has  been 
or  shall  be  assigned,  set  off,  or  conveyed  by  purchase  or 
otherwise  to  the  United  States  in  payment  of  debts  or  pen- 
alties arising  under  the  laws  relating  to  internal  revenue, 
or  which  has  been  or  shall  be  vested  in  the  United  States 
by  mortgage  or  other  security  for  the  payment  of  such 
debts  and  of  all  trusts  created  for  the  use  of  the  United 
States  in  payment  of  such  debts  due  them;  and,  with  the 
approval  of  the  Secretary  of  the  Treasury,  may,  at  public 
vendue,  and  upon  not  less  than  twenty  days'  notice,  sell 
and  dispose  of  all  real  estate  owned  or  held  by  the  United 
States  aforesaid;  and  until  such  sale  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  may  lease  such  real  estate  owned  as  afore- 
said on  such  terms  and  for  such  period  as  they  shall  deem 
expedient. 

And  in  cases  where  real  estate  has  or  may  become  the 
property  of  the  United  States  by  conveyance  or  otherwise, 
in  payment  of  or  as  security  for  a  debt  arising  under  the 
laws  relating  to  internal  revenue,  and  such  debt  shall  have 
been  paid,  together  with  the  interest  thereon,  at  the  rate 
of  one  per  centum  per  month,  to  the  United  States, 
within  two  years  from  the  date  of  the  acquisition  of  such 
real  estate,  it  shall  be  lawful  for  the  Conamissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury,  to  release  by  deed,  or  otherwise  convey 
such  real  estate  to  the  debtor  from  whom  it  was  taken,  or 
to  his  heirs  or  other  legal  representatives. 

^(yurce:  Act  Mar.  2,  1867,  c.  169,  §  4,  14  Stat.  472. 
Act  Mar.  1, 1879,  c.  125,  §  3,  20  Stat.  332. 


148  FEDERAL   INCOME   TAX   LAW 

Sec.  3209.  Whenever  a  collector  has  on  any  list  duly  re- 
turned to  him  the  name  of  any  person  not  within  his  collec- 
tion-district who  is  liable  to  tax,  or  of  any  person  so  liable 
who  has,  in  the  collection-district  in  which  he  resides,  no 
sufficient  property  subject  to  seizure  or  distraint,  from 
which  the  money  due  for  tax  can  be  collected,  such  collec- 
tor shall  transmit  a  statement  containing  the  name  of  the 
person  liable  to  such  tax,  with  the  amount  and  nature 
thereof,  duly  certified  under  his  hand,  to  the  collector  of 
any  district  to  which  said  person  shall  have  removed,  or  in 
which  he  shall  have  property,  real  or  personal,  liable  to 
be  seized  and  sold  for  tax.  And  the  collector  to  whom  the 
said  certified  statement  is  transmitted  shall  proceed  to 
collect  the  said  tax  in  the  same  way  as  if  the  name  of  the 
person  and  objects  of  tax  contained  in  the  said  certified 
statement  were  on  any  list  of  his  own  collection-district; 
and  he  shall,  upon  receiving  said  certified  statement  as 
aforesaid,  transmit  his  receipt  for  it  to  the  collector  send- 
ing the  same  to  him. 

Source:    Act  June  30,  1864,  c.  173,  §  32,  13  Stat.  236. 

Sec.  3210.  The  gross  amount  of  all  taxes  and  revenues 
received  or  collected  by  virtue  of  this  Title,  or  of  any  law 
hereafter  enacted  providing  internal  revenue,  shall  be 
paid,  by  the  officers  receiving  or  collecting  the  same, 
daily  into  the  Treasury  of  the  United  States,  under  the 
instructions  of  the  Secretary  of  the  Treasury,  without 
any  abatement  or  deduction  on  account  of  salary,  com- 
pensation, fees,  costs,  charges,  expenses,  or  claims  of  any 
description;  and  a  certificate  of  such  payment,  stating 
the  name  of  the  depositor  and  the  specific  account  on 
which  the  deposit  was  made,  signed  by  the  Treasurer, 
assistant-treasurer,  designated  depositary,  or  proper  oJ05cer 
of  a  deposit  bank,  shall  be  transmitted  to  the  Commis- 
sioner of  Internal  Revenue:  Provided,  That  in  districts 
where,  from  the  distance  of  the  officer,  collector,  or  agent 
receiving  or  collecting  such  taxes  and  revenues  from  a 


REVISED   STATUTES  .  149 

proper  Government  depository,  the  Secretary  of  the  Treas- 
ury may  deem  it  proper,  he  may  extend  the  time  for  mak- 
ing such  pajonent,  not  exceeding,  however,  in  any  case  a 
period  of  one  month. 

Source:    Act  Mar.  3,  1865,  c.  78,  §  3,  13  Stat.  483. 

Sec.  3211.  The  Secretary  of  the  Treasury  is  authorized 
to  designate  one  or  more  depositories  in  each  State,  for  the 
deposit  and  safe-keeping  of  the  money  collected  by  virtue 
of  the  internal  revenue  laws;  and  the  receipt  of  the  proper 
officer  of  such  depository  to  a  collector  for  the  money 
deposited  by  him  shall  be  a  sufficient  voucher  for  such 
collector  in  the  settlement  of  his  accounts  at  the  Treasury 
Department. 
Source:    Act  June  30,  1864,  c.  173,  §  33,  13  Stat.  236. 

Sec.  3212.  Every  collector  shall,  at  the  expiration  of 
each  month  after  he  commences  his  collections,  transmit 
to  the  Commissioner  of  Internal  Revenue  a  statement  of 
the  collections  made  by  him  within  the  month.  And  every 
collector  shall  complete  the  collection  of  all  sums  assigned 
to  him  for  collection,  and  shall  pay  over  the  same  into  the 
Treasury,  and  shall  render  his  accounts  to  the  Treasury 
Department  as  often  as  he  may  be  required. 

Source:    Act  June  30,  1864,  c.  173,  §  33,  13  Stat.  236. 

Sec.  3213.  It  shall  be  the  duty  of  the  collectors,  in  their 
respective  districts,  subject  to  the  provisions  of  this  Title, 
to  prosecute  for  the  recovery  of  any  sums  which  may  be 
forfeited  by  law.  All  suits  for  fines,  penalties,  and  forfei- 
tures, where  not  otherwise  provided  for,  shall  be  brought 
in  the  name  of  the  United  States,  in  any  proper  form  of 
action,  or  by  any  appropriate  form  of  proceeding,  qui  tam 
or  otherwise,  before  any  circuit  or  district  court  of  the 
United  States,  for  the  district  within  which  said  fine, 
penalty,  or  forfeiture  may  have  been  incurred,  or  before 
any  other  court  of  competent  jurisdiction;  and  taxes  may 


150  FEDERAL   INCOME   TAX   LAW 

be  sued  for  and  recovered  in  the  name  of  the  "United  States 
in  any  proper  form  of  action,  before  any  circuit  or  district 
court  of  the  United  States  for  the  district  within  which  the 
HabiUty  to  such  tax  is  incurred,  or  where  the  party  from 
whom  such  tax  is  due  resides  at  the  time  of  the  commence- 
ment of  the  said  action. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 

Action,  assessment  not  necessary  condition  precedent.    King  v. 

U.  S.,  99  U.  S.  229,  25  L.  Ed.  373. 
Action,  form  of,  entirely  within  discretion  of  government.    Dollar 

Savings  Bank  v,  U.  S.,  19  WaU.  227,  239,  22  L.  Ed.  80;  United 

States  V.  Chamberlain,  219  U.  S.  250,  55  L.  Ed.  204. 
Assessment,  see  Action. 
Assessment  not  binding  upon  third  parties.    U.  S.  v.  Rhindskopf, 

8  Biss.  507,  Fed.  Cas.  16166. 
Assessment  nol^  conclusive.    U.  S.  v.  Rhindskopf,  105  U.  S.  418, 

26  L.  Ed.  1131;  U.  S.  v.  Bank  of  Am.,  15  Fed.  730;  U.  S.  v. 

Myers,  3  Hughes,  239,  Fed.  Cas.  15846;  United  States  v. 

Halloran,  22  I.  R.  R.  321,  4  Blatch.  1,  Fed.  Cas.  15286. 
Assessment  not  necessary  condition  precedent  to  action  of  debt. 

United  States  v.  Little  Miami,  etc.,  Co.,  1  Fed.  700,  108  U.  S. 

277. 
Assessment,  pajnnent  of  not  a  bar  to  suit  for  additional  amount. 

United  States  v.  Little  Miami,  etc.,  Co.,  1  Fed.  700,  108  U.  S. 

277. 
Assessment  presumed  vahd.    Clinkenbeard  v.  U.  S.,  21  Wall.  65, 

22  L.  Ed.  477;  U.  S.  v.  Cole,  134  Fed.  697;  U.  S.  v.  Bristow, 

20  Fed.  378;  U.  S.  v.  Black,  11  Blatch.  538,  Fed.  Cas.  14660; 

Schmidt  v.  Trowbridge,  24  I.  R.  R.  381. 
Burden  of  proof  upon  United  States  to  show  facts  sufficient  to 

warrant  judgment.    U.  S.  v.  Phila.  &  Reading  R.  R.,  123  U.  S. 

113,  31  L.  Ed.  138,  8  S.  Ct.  77. 
Complaint  sufficient,  if  averring  declaration  of  dividend  or  in- 
crease of  surplus  through  earnings.    U.  S.  v.  Bklyn.  &c.  R.  R., 

14  Fed.  284. 
Corporation,   action  against,   after  dissolution.     T.   D.,    1650, 

AprU  15,  1910. 
Defense,  erroneous  assessment  or  illegality  of  tax  may  be  shown 

as,  although  no  appeal  has  been  taken  to  Commissioner. 

Clinkenbeard  v.  U.  S.,  21  Wall.  65,  22  L.  Ed.  477;  United 

States  V.  Bank  of  America,  15  Fed.  730. 


REVISED    STATUTES  151 

Defense  of  illegality  of  assessment  not  affected  by  limitation  pre- 
scribed by  §  3227.    United  States  v.  Nebraska  Dist.  Co.,  80 

Fed.  285,  25  C.  C.  A.  418. 
Defense,  non-entry  of  taxes  upon  assessment  list  is  not.    U.  S.  v. 

Tilden,  9  Ben.  368,  Fed.  Cas.  16519. 
Defense — Error  in  payment  of  dividend  is  not.     Central  Natl. 

Bank  v.  United  States,  137  U.  S.  355. 
Evidence — Cash  payment  of  dividends  conclusive  evidence  of  net 

profits.    Central  Bank  v.  U.  S.,  137  U.  S.  355,  34  L.  Ed.  703, 

11  S.  Ct.  126. 
Evidence,  declaration  of  dividends  conclusive.     Central  Natl. 

Bank  V.  U.  S.,  137  U.  S.  365,  34  L.  Ed.  703,  11  S.  Ct.  126; 

Bailey  v.  R.  R.,  106  U.  S.  109,  27  L.  Ed.  81. 
Evidence — Increase  of  capital  stock,  not  even  prima  facie  evi- 
dence of  income.    Commonwealth  v.  Erie  &  Pittsburgh  R.  R. 

Co.,  74  Pa.  St.  94. 
Evidence — Report  of  bank  showing  liability  to  tax  conclusive. 

Cen.  Natl.  Bank  v.  U.  S.,  137  U.  S.  355,  34  L.  Ed.  703,  11 

S.  Ct.  126. 
Evidence,  sufficiency  of,  for  recovery.   U.  S.  v.  Central  Natl.  Bank, 

15  Fed.  222. 
Indictment,  recovery  of  penalty  by.    United  States  v.  Craft,  43 

Fed.  374;  United  States  v.  Elliot,  Fed.  Cas.  15043. 
Laches,  defense  of,  not  applicable  against  U.  S.   U.  S.  v.  Insley,  130 

U.  S.  263,  32  L.  Ed.  968,  9  S.  Ct.  485. 
Limitations,  statute  of,  not  applicable  to  U.  S.    U.  S.  v.  Insley,  130 

U.  S.  263,  32  L.  Ed.  968,  9  S.  Ct.  485. 
Receiver — Illegality  or  error  of  assessment  may  be  shown  upon  ap- 

pUcation  for.    U.  S.  v.  Neb.  Distillmg  Co.,  80  Fed.  285,  25 

C.  C.  A.  418. 
Set-off — A  credit  which  could  be,  but  has  not  been  presented  to 

Commissioner,  cannot  be  set  up  as.    R.  R.  Co.  v.  U.  S.,  101 

U.  S.  543,  25  L.  Ed.  1068. 
Set-off,  claim  for,  credit  not  allowed  as,  unless  previously  pre- 
sented to  treasury  accounting  officers.    R.  R.  v.  U.  S.,  101 

U.  S.  543,  25  L.  Ed.  1068. 
Set-off — No  other  claim  against  U.  S.  can  be  alleged  as.    U.  S.  v. 

Pac.  R.  R.,  4  Dill.  66,  Fed.  Cas.  15983. 
Venue — Tax  actions  must  be  brought  in  district  of  defendant's 

residence.    Rev.  St.,  §  733;  United  States  v.  N.  Y.,  N.  H.  & 

H.  R.  R.  Co.,  10  Ben.  144,  Fed.  Cas.  15874. 

Sec.  3214.  No  suit  for  the  recovery  of  taxes,  or  of  any 
fine,  penalty,  or  forfeiture,  shall  be  commenced  unless  the 


152  FEDERAL   INCOME   TAX   LAW 

Commissioner  of  Internal  Revenue  authorizes  or  sanc- 
tions the  proceedings:  Provided,  That  in  case  of  any  suit 
for  penalties  or  forfeitures  brought  upon  information  re- 
ceived from  any  person,  other  than  a  collector  or  deputy 
collector,  the  United  States  shall  not  be  subject  to  any 
costs  of  suit. 
Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  111. 

Seg.  3215.  It  shall  be  the  duty  of  the  Conmiissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  to  establish  such  regulations,  not  inconsis- 
tent with  law,  for  the  observance  of  revenue  officers, 
district  attorneys,  and  marshals,  respecting  suits  arising 
under  the  internal  revenue  laws  in  which  the  United  States 
is  a  party,  as  may  be  deemed  necessary  for  the  just  re- 
sponsibility of  those  officers  and  the  prompt  collection  of 
all  revenues  and  debts  due  and  accruing  to  the  United 
States  under  such  laws. 

Source:    Act  Mar.  2,  1867,  c.  169,  §  3,  14  Stat.  472. 

Sec.  3216.  All  judgments  and  moneys  recovered  or 
received  for  taxes,  costs,  forfeitures,  and  penalties  shall 
be  paid  to  collectors  as  internal  taxes  are  required  to  be 
paid. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  111. 
See  §  3178. 

Sec.  3217.  When  any  collector  fails  either  to  collect 
or  to  render  his  account,  or  to  pay  over  in  the  manner  or 
within  the  times  provided  by  law,  the  First  Comptroller 
of  the  Treasury  shall,  immediately  after  evidence  of  such 
delinquency,  report  the  same  to  the  Sohcitor  of  the  Trea- 
sury, who  shall  issue  a  -warrant  of  distress  against  such 
delinquent  collector,  directed  to  the  marshal  of  the  district, 
expressing  therein  the  amount  with  which  the  said  collec- 
tor is  chargeable,  and  the  sums,  if  any,  which  have  been 
paid  over  by  him,  so  far  as  the  same  are  ascertainable. 
And  the  said  marshal  shall,  himself,  or  by  his  deputy,  im- 


REVISED   STATUTES  153 

mediately  proceed  to  levy  and  collect  the  sum  which  may 
remain  due,  with  five  per  centum  thereon,  and  all  the 
expenses  and  charges  of  collection,  by  distress  and  sale 
of  the  goods  and  chattels,  or  any  personal  effects  of  the 
delinquent  collector,  giving  at  least  five  days'  notice  of  the 
time  and  place  of  the  sale,  in  the  manner  provided  by  law 
for  advertising  sales  of  personal  property  on  execution  in 
the  State  wherein  such  collector  resides.  And  the  bill 
of  sale  of  the  officer  of  any  goods,  chattels,  or  other  personal 
property,  distrained  and  sold  as  aforesaid,  shall  be  con- 
clusive evidence  of  title  to  the  purchaser,  and  prima  facie 
evidence  of  the  right  of  the  officer  to  make  such  sale,  and 
of  the  correctness  of  his  proceedings  in  selling  the  same. 
And  for  want  of  goods  and  chattels,  or  other  personal  ef- 
fects of  such  collector,  sufficient  to  satisfy  any  warrant  of 
distress,  issued  as  aforesaid,  the  real  estate  of  such  collector, 
or  so  much  thereof  as  may  be  necessary  for  satisfying  the 
said  warrant,  after  being  advertised  for  at  least  three  weeks 
next  before  the  time  of  sale,  in  not  less  than  three  public 
places  in  the  collection-district,  and  in  one  newspaper 
printed  in  the  county  or  district,  if  any  there  be,  shall  be 
sold  at  public  auction  by  the  marshal  or  his  deputy.  Upon 
such  sale,  the  marshal  shall  make  and  deliver  to  the  pur- 
chaser of  the  premises  sold  a  deed  of  conveyance  thereof, 
to  be  executed  and  acknowledged  in  the  manner  and  form 
prescribed  by  the  laws  of  the  state  in  which  said  lands 
are  situated,  and  said  deed  so  made  shall  invest  the  pur- 
chaser with  all  the  title  and  interest  of  the  defendant 
named  in  said  warrant,  existing  at  the  time  of  the  seizure 
thereof.  And  all  moneys  that  may  remain  of  the  proceeds 
of  such  sale  of  personal  or  real  property,  after  satisfying 
the  said  warrant  of  distress,  and  paying  the  reasonable 
costs  and  charges  of  sale,  shall  be  returned  to  the  pro- 
prietor of  the  property  sold  as  aforesaid. 
Source:    Act  June  3,  1864,  c.  173,  §  35,  13  Stat.  237. 

Sec.  3218.  Every  collector  shall  be  charged  with  the 
whole  amount  of  taxes,  whether  contained  in  lists  trans- 


154  FEDERAL  INCOME  TAX  LAW 

mitted  to  him  by  the  Commissioner  of  Internal  Revenue, 
or  by  other  collectors,  or  dehvered  to  him  by  his  prede- 
cessor in  oflfice,  and  with  the  additions  thereto,  with  the 
par  value  of  all  stamps  deposited  with  him,  and  with  all 
moneys  collected  for  penalties,  forfeitures,  fees,  or  costs; 
and  he  shall  be  credited  with  all  payments  into  the  Trea- 
sury made  as  provided  by  law,  with  all  stamps  returned. by 
him  uncancelled  to  the  Treasmy,  and  with  the  amount  of 
taxes  contained  in  the  lists  transmitted  in  the  manner 
heretofore  provided  to  other  collectors,  and  by  them 
receipted  as  aforesaid;  also  with  the  amount  of  the  taxes 
of  such  persons  as  may  have  absconded,  or  become  insol- 
vent, prior  to  the  day  when  the  tax  ought,  according  to 
the  provisions  of  law,  to  have  been  collected,  and  with 
all  uncollected  taxes  transferred  by  him  or  by  his  deputy 
acting  as  collector  to  his  successor  in  ofl&ce:  Provided, 
That  it  shall  be  proved  to  the  satisfaction  of  the  Conomis- 
sioner  of  Internal  Revenue,  who  shall  certify  the  facts 
to  the  First  Comptroller  of  the  Treasury,  that  due  dili- 
gence was  used  by  the  collector.  And  each  collector  shall 
also  be  credited  with  the  amount  of  all  property  purchased 
by  him  for  the  use  of  the  United  States,  provided  he  faith- 
fully account  for  and  pay  over  the  proceeds  thereof  upon 
a  resale  of  the  same  as  required  by  law. 

Sirarce:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 
Act  Dec.  24,  1872,  c.  13,  §  2,  17  Stat.  402. 

Sec.  3219.  In  the  case  of  the  death,  resignation,  or 
removal  of  any  collector,  all  lists  and  accounts  of  taxes 
uncollected  shall  be  transferred  to  his  successor  in  office  as 
soon  as  such  successor  is  appointed  and  qualified,  and  it 
shall  be  the  duty  of  such  successor  to  collect  the  same. 

S<mrce:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  110. 

Sec.  3220.  The  Conunissioner  of  Internal  Revenue, 
subject  to  regulations  prescribed  by  the  Secretary  of  the 
Treasury,  is  authorized,  on  appeal  to  him  made,  to  remit, 
refund,  and  pay  back  all  taxes  erroneously  or  illegally  as- 


REVISED   STATUTES  155 

sessed  or  collected,  all  penalties  collected  without  author- 
ity, and  all  taxes  that  appear  to  be  unjustly  assessed  or  ex- 
cessive in  amount,  or  in  any  manner  wrongfully  collected ; 
also  to  repay  to  any  collector  or  deputy  collector  the  full 
amount  of  such  sums  of  money  as  may  be  recovered 
against  him,  in  any  court,  for  any  internal  taxes  collected 
by  him,  with  the  cost  and  expenses  of  suit;  also  all  damages 
and  costs  recovered  against  any  assessor,  assistant  assessor, 
collector,  deputy  collector,  or  inspector,  in  any  suit  brought 
against  him  by  reason  of  anything  done  in  the  due  per- 
formance of  his  official  duty:  Provided,  That  where  a  sec- 
ond assessment  is  made  in  case  of  a  list,  statement,  or 
return  which  in  the  opinion  of  the  collector  or  deputy  col- 
lector was  false  or  fraudulent,  or  contained  any  understate- 
ment or  undervaluation,  such  assessment  shall  not  be  re- 
mitted, nor  shall  taxes  collected  under  such  assessment  be 
refunded,  or  paid  back,  unless  it  is  proved  that  said  list, 
statement,  or  return  was  not  false  or  fraudulent,  and  did 
not  contain  any  understatement  or  undervaluation. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  111. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 

Appeal,  filing  with  proper  collector  a  sufficient  presentation  to 
Commissioner.  United  States  v.  Savings  Bank,  104  U.  S. 
728,  26  L.  Ed.  908.    Contra,  14  Op.  Atty.  Gen.  615. 

Application  for  refund,  if  made  to  Secretary  of  Treasury,  must  be 
presented  before  Commissioner's  decision.  Dupasseur  et  al. 
V.  U.  S.,  19  Ct.  CI.  1. 

Appeal,  date  of  filing  depends  upon  time  of  receipt  by  Commis- 
sioner, and  not  upon  time  of  deposit  with  collector.  Colton 
Press  Co.  v.  Collector,  1  Woods,  296,  Fed.  Cas.  3271. 

Claim  not  insufficient  because  of  insufficiency  of  treasury  forms 
when  accompanied  by  supplemental  statement.  Kings  Co. 
Savings  Inst.».  Blair,  116  U.  S.  200, 29  L.  Ed.  657, 6  S.  Ct.  353. 

Commissioner,  see  Decision. 

Commissioner,  adverse  decision  of,  does  not  prevent  allowance  of 
payment  of  judgment.    Nixon  v.  U.  S.,  18  Ct.  CI.  448. 

Commissioner,  decision  of,  as  to  refund  not  final  where  rules  re- 
quired submission  to  Secretary.  Stotesbury  v.  U.  S.,  146 
U.  S.  196,  36  L.  Ed.  940,  23  Ct.  CI.  285. 


156  FEDERAL  INCOME  TAX  LAW 

Commissioner,  decision  judicial  and  prevents  application  by  claim- 
ant to  courts  for  same  relief.  Corning  v.  United  States,  34 
Ct.  CI.  271,  278. 

Conamissioner,  decision  rendered  VQid  by  mistake  of  jurisdiction, 
not  by  error  of  judgment  or  discretion.  Nixon  v.  United 
States,  18  Ct.  CI.  448;  Woolner  v.  United  States,  13  Ct.  CI. 
355. 

Commissioner,  discretion  as  to  refund,  not  reviewable  by  any 
other  officers  where  such  decision  was  in  form  of  memoran- 
dum, submitted  for  consideration.    13  Op.  Atty.  Gen.  439, 

14  Op.  Atty.  Gen.  275;  Woolner  v.  U.  S.,  13  Ct.  CI.  355,  434; 
Barnett  v.  U.  S.,  16  Ct.  CI.  515;  17  Ct.  CI.  434;  Dunnegan  v. 
United  States,  17  Ct.  CI.  247;  Nixon  v.  U.  S.,  18  Ct.  CI.  448; 
Sybrandt  v.  United  States,  19  Ct.  CI.  461-466. 

Commissioner,  jurisdiction  of,  may  be  inquired  into  by  Court  of 

Claims.    Seat  v.  U.  S.,  18  Ct.  CI.  458. 
Commissioner,  recommendation  to  Secretary  of  Treasury  by,  for 

purposes  of  consideration  and  advisement,  not  a  final  decision. 

Stotesbury  v.  United  States,  146  U.  S.  196,  26  L.  Ed.  940,  13 

S.  Ct.  1. 
Commissioner,  refund  by,  not  reviewable  by  courts  unless  im- 
peached for  fraud,  etc.    U.  S.  v.  Kaufman,  96  U.  S.  567,  24 

L.  Ed.  792. 
Compromise  should  not  be  sought  by  any  official.    T.  D.,  1692, 

April  20,  1911. 
Costs — Authority  to  refund,  includes  authority  to  refund  costs 

paid.    U.  S.  V.  Davis,  54  Fed.  147,  4  C.  C.  A.  251. 
Decision  of  Commissioner,  evidence  of.    First  Natl.  Bank  v.  U.  S., 

15  Ct.  CI.  225. 

Decision  of  Commissioner  granting  refund  may  be  reversed  before 

payment.    Ridgway  v.  U.  S.,  18  Ct.  CI.  707. 
Decision  of  Commissioner,  reopened  only  for  errors  in  fact  or  newly 

discovered  evidence.    14  Op.  Atty.  Gen.  275. 
Decision  of  Commissioner,  groimds  of  impeachment  of,  are  fraud, 

want  of  jurisdiction,  or  apparent  mistake.    Nixon  v.  U.  S.,  18 

Ct.  CI.  448;  First  Nat.  Bank  of  Greencastle  v.  U.  S.,  15  Ct. 

CI.  225. 
Decision  of  Commissioner  is  in  the  nature  of  an  arbitrator's  award, 

nature  and  status  of.    First  Natl.  Bank  v.  U.  S.,  15  Ct.  CI. 

225. 
Decision  of  Commissioner  prima  facie  evidence  of  liability  of 

United  States.    Logan  County  v.  U.  S.,  169  U.  S.  255,  42  L. 

Ed.  737,  18  S.  Ct.  737. 


REVISED   STATUTES  157 

Decision  should  be  made  by  Commissioner  and  cannot  be  reviewed 

by  courts  after  several  applications,  etc.    Sybrandt  et  al.  v. 

U.S.,  19Ct.  CI.  461. 
Effect  of  this  section,  see  §  3226. 
Judgment,  see  §  3226. 
Limitations,  right  of  recovery  provided  in  this  section  must  be 

pursued  within  period  of  two  years  prescribed  by  §  3228. 

Logan  County  v.  United  States,  169  U.  S.  258,  42  L.  Ed.  737, 

18  S.  Ct.  361. 

Offer,  amount  of  should  be  left  to  discretion  of  corporation.   T.  D., 

1692,  April  20,  1911. 
Offer,  trivial,  not  acceptable.    T.  D.,  1698,  May  23,  1911. 
Refund,  duty  of  Commissioner  to  make,  when  due.    Armour  v. 

Roberts,  151  Fed.  844. 
Secretary  of  Treasury,  see  Application  for  Refund. 
Secretary  of  Treasury  has  absolute,  statutory  power  to  remit 

fines  and  penalties.    Dorscheimer  v.  U.  S.,  7  Wall.  166,  173, 

19  L.  Ed.  187;  U.  S.  v.  Malone,  22  I.  R.  R.  403,  Fed.  Cas. 
15713,  8  Ben.  574;  Op.  Atty.  Gen.  399;  Johnson  v.  U.  S.,  8 
Wall.  166,  19  L.  Ed.  187. 

Secretary  of  Treasury  has  no  power  to  compromise  collectible 
judgment.    23  Op.  Atty.  Gen.  20. 

Sec.  3224.  No  suit  for  the  purpose  of  restraining  the 
assessment  or  collection  of  any  tax  shall  be  maintained  in 
any  court. 
Source:    Act  Mar.  2,  1867,  c.  169,  §  10,  14  Stat.  475. 

Injunction  will  lie  where  Commissioner  acts  so  ultra  vires  as  to 

justify  court  in  holding  his  action  not  controlling.    Kissinger 

V.  Bean,  8  Biss.  60,  Fed.  Cas.  7853. 
Injunction  will  lie,  where  tax  has  been  paid,  to  prevent  collection 

of  additional  amount.    Frayser  v.  Russell,  3  Hughes,  227,  Fed. 

Cas.  5067. 
Injunction  will  not  lie,  except  in  case  of  manifest  violation  of  law 

depriving  assessor  of  all  jurisdiction.     Del.  R.  R.  Co.  v. 

Prettyman,  17  I.  R.  R.  99,  Fed.  Cas.  3767. 
Injunction  will  not  lie  to  prevent  collection  of  tax  alleged  to  have 

been  illegally  assessed.    Snyder  v.  Marks,  109  U.  S.  189,  27 

L.  Ed.  901,  3  S.  Ct.  157. 
Injunction  will  not  lie  on  ground  of  multiplicity  of  suits.    Schulen- 

berg-Boeckeler  Lumber  Co.  v.  Town  of  Hayward,  20  Fed. 

422- 


158  FEDERAL   INCOME   TAX   LAW 

Injunction  by  director  or  stockholder  to  enjoin  payment  of  tax  by 
corporation  will  not  lie.    T.  D.,  1788,  July  25,  1912. 

Injunction,  in  shape  of  mandamus,  will  not  lie.  Robbing  v.  Free- 
land,  14  I.  R.  R.  28. 

Mandatory  injunction,  being  in  effect  a  bill  to  restrain  collection, 
will  not  lie.    Miles  v.  Johnson,  59  Fed.  38. 

Prohibition  against  injunction  prevents  any  action  hindering  col- 
lection by  tax  oflacer.  Rowland  v.  Soule,  Deady,  413,  Fed. 
Cas.  6800. 

Prohibition  extends  to  suit  for  restraint  of  assessment.  Miles  v. 
Johnson,  59  Fed.  38. 

Prohibition  probably  inapplicable  in  case  of  clear  and  manifest 
violation  of  the  law.  Kissinger  v.  Bean,  7  Biss.  60,  Fed.  Cas. 
7853. 

Sec.  3225.  When  the  second  assessment  is  made  in 
case  of  any  list,  statement,  or  return,  which  in  the  opinion 
of  the  collector  or  deputy  collector  was  false  or  fraudulent, 
or  contained  any  understatement  or  undervaluation,  no 
taxes  collected  under  such  assessment  shall  be  recovered 
by  any  suit,  unless  it  is  proved  that  the  said  list,  state- 
ment, or  return  was  not  false  nor  fraudulent,  and  did  not 
contain  any  understatement  or  undervaluation. 

Source:    Act  July  13,  1866,  c.  184,  §  9,  14  Stat.  111. 
Act  Dec.  24,  1872,  c.  13,  §  1,  17  Stat.  401. 

Sec.  3226.  No  suit  shall  be  maintained  in  any  court  for 
the  recovery  of  any  internal  tax  alleged  to  have  been  erron- 
eously or  illegally  assessed  or  collected,  or  of  any  penalty 
claimed  to  have  been  collected  without  authority,  or  of 
any  sum  alleged  to  have  been  excessive  or  in  any  manner 
wrongfully  collected,  until  appeal  shall  have  been  duly 
made  to  the  Commissioner  of  Internal  Revenue,  ac- 
cording to  the  provisions  of  law  in  that  regard,  and  the 
regulations  of  the  Secretary  of  the  Treasury  established 
in  pursuance  thereof,  and  a  decision  of  the  Commissioner 
has  been  had  therein:  Provided,  That  if  such  decision  is 
delayed  more,  than  six  months  from  the  date  of  such 
appeal,  then  the  said  suit  may  be  brought,  without  first 


REVISED   STATUTES  159 

having  a  decision  of  the  Commissioner  at  any  time  within 
the  period  hmited  in  the  next  section. 

Source:    Act  July  13,  1866,  c.  184,  §  19,  14  Stat.  152. 
Act  June  6,  1872,  c.  315,  §  44,  17  Stat.  257. 
Act  Feb.  27,  1877,  c.  69,  19  Stat.  248. 

Action,  see  Appeal,  Application,  Assumpsit,  Burden  of  Proof, 
Decision,  Protest,  Rejection. 

Action,  conunencement  of,  may  be  any  time  within  two  years 
after  Commissioner's  decision,  though  delayed  more  than  six 
months  after  taking  appeal.  Merck  v.  Treat,  174  Fed. 
388. 

Action,  right  of,  not  given  by  minor  irregularities.  Bailey  v.  R.  R. 
Co.,  22  Wall.  604,  22  L.  Ed.  840. 

Allowance  by  Commissioner,  see  Action,  Appeal,  Application, 
Burden  of  Proof,  Decision,  Protest,  Rejection. 

Allowance  by  Commissioner  sufficient  basis  of  action  against 
United  States,  in  Court  of  Claims.  United  States  v.  Savings 
Bank,  104  U.  S.  728;  United  States  v.  Kaufman,  96  U.  S. 
567,  24  L.  Ed.  792;  Commonwealth,  etc.,  Co.  v.  United  States, 
37  Ct.  CI.  536;  Dugan  v.  United  States,  34  Ct.  CI.  458;  Boehn 
V.  United  States,  21  Ct.  CI.  294;  McClure  v.  United  States, 
19  Ct.  CI.  18-29. 

Appeal,  see  Action,  Application,  Burden  of  Proof,  Decision,  Pro- 
test, Rejection. 

Appeal  after  payment  not  necessary  when  appeal  has  been  taken 
from  assessment.  San  Francisco,  etc..  Society  v.  Carey,  17 
I.  R.  R.  109. 

Appeal  against  assessment  imnecessary.  U.  S.  v.  Myers,  3  Hughes, 
239,  Fed.  Cas.  15816,  24  I.  R.  R.  44. 

Appeal  to  Commissioner,  a  condition  precedent  to  action.  Lauer 
V.  U.  S.,  5  Ct.  CI.  447;  Kings  Co.  Savings  Inst.  v.  Blair,  116 
U.  S.  200,  29  L.  Ed.  657,  6  S.  Ct.  353;  DeBary  v.  Dunne,  162 
Fed.  961;  Arnson  v.  Murphy,  109  U.  S.  238,  27  L.  Ed.  920,  3 
S.  Ct.  184. 

Appeal  to  Commissioner,  etc.,  must  be  pleaded.  Stuart  v.  Barnes, 
43  Fed.  281;  Coblens  v.  Abel,  Woolw.  293,  Fed.  Cas.  2926. 
Contra,  Hendy  v.  Soule,  Deady,  400,  Fed.  Cas.  6359. 

Appeal  to  Commissioner  not  condition  precedent  to  any  other 
action  than  one  f6r  recovery  of  taxes.  Erskiae  v.  Hohnbach, 
14  Wall.  616, 20  L.  Ed.  745.  Contra,  Nichols  v.  United  States, 
7  WaU.  130,  19  L.  Ed.  125. 

Appeal,  or  certified  copy,  or  other  best  evidence  of,  should  be  pro- 


160  FEDERAL   INCOME   TAX   LAW 

duced.  Hubbard  v.  KeUy,  8  W.  Va.  46,  cited  in  65  W.  Va.  69, 
145;  Lauer  v.  U.  S.,  5  Ct.  CI.  447. 

Appeal,  filing  with  proper  collector  for  transmission,  equivalent 
to  filing  with  Commissioner.  U.  S.  v.  Savings  Bank,  104  U.  S. 
728,  26  L.  Ed.  908. 

Appeal  to  Commissioner  sufficiently  made  by  claim  for  abatement. 
DeBary  v.  Dunne,  162  Fed.  961. 

Appeal  taken  when  filed  in  office  of  Commissioner,  not  when 
lodged  with  collector  for  completion.  Colton  Press  Co.  v. 
Collector,  1  Woods,  296,  Fed.  Cas.  3271. 

Application,  see  Action,  Appeal,  Burden  of  Proof,  Decision,  Pro- 
test, Rejection. 

Application  for  refund  insufficiently  filed,  by  delivery  to  collector, 
etc.    14  Op.  Atty.  Gen.  615. 

Assessment,  due  and  regular,  complete  defense  to  collector.  Hard- 
ing V.  Woodcock,  137  U.  S.  43,  34  L.  Ed.  580,  11  S.  Ct.  6. 

Assumpsit,  see  Statutory  Remedy. 

Assumpsit  maintainable  against  collector.  Improvement  Co.  v. 
Slack,  100  U.  S.  654,  25  L.  Ed.  609. 

Burden  of  proof,  see  Action,  Appeal,  Application,  Decision,  Pro- 
test, Rejection. 

Burden  of  proof  as  to  fraud  or  mistake  rests  upon  government 
seeking  to  defend  against  allowance  of  Commissioner.  Logan 
County  V.  U.  S.,  169  U.  S.  255,  42  L.  Ed.  737,  18  S.  Ct.  361. 

Circuit  Court  of  Appeals,  jurisdiction  of.  Louisville  Pub.  Ware- 
house Co.  V.  Collector,  49  Fed.  561,  1  C.  C.  A.  371. 

Claim,  see  Appeal,  Application. 

Claim  not  invalid  by  reason  of  irregularity.  Wayne  v.  U.  S.,  26 
Ct.  CI.  274. 

Claim  for  refund,  informal  or  defective,  sufficient  for  purpose  of 
amendment.    14  Op.  Atty.  Gen.  615. 

Common-law  action,  see  Statutory  Remedy. 

Costs  allowed  when  sanctioned  by  practice  of  state  courts.  De- 
Bary V.  Carter,  102  Fed.  130,  42  C.  C.  A.  209. 

Court  of  Claims,  jurisdiction  of.  U.  S.  v.  Real  Estate  Savings 
Bank,  104  U.  S.  728,  26  L.  Ed.  908, 17  Ct.  CI.  434;  U.  S.  Jud. 
Code  (36  Stat.  1087),  §  145. 

Court  of  Claims — No  jurisdiction  to  allow  claims  rejected  by  Com- 
missioner— only  those  allowed  by  him*  Boehm  et  al.  v.  U.  S., 
21  Ct.  CI.  290. 

Court  of  Claims — Tort  may  not  be  waived  to  avoid  limitation 
against  tort  actions.    McArthur  v.  U.  S.,  29  Ct.  CI.  191-4. 

Criminal  liability,  see  Liability. 


REVISED    STATUTES  161 

Damages,  see  Punitive. 

Decision,  see  Action,  Appeal,  Application,  Burden  of  proof,  Pro- 
test, Rejection. 

Decision  of  Commissioner,  see  §  3220,  citations. 

Decision  of  Commissioner,  acting  within  scope  of  his  authority  and 
jurisdiction,  not  reviewable  as  to  sufficiency  of  evidence. 
Woolner  v.  U.  S.,  13  Ct.  CI.  355. 

District  Court,  jurisdiction  of.  United  States  Jud.  Code  (36  Stat. 
1087),  §  145. 

Effect  of  this  section  and  §  3220  not  to  be  so  construed  as  to  per- 
mit adverse  decision  of  Commissioner  to  bar  relief,  under 
§  3220,  after  recovery  of  judgment  against  collector.  Nixon 
V.  United  States,  18  Ct.  CI.  448. 

Exemplary,  see  Punitive. 

Federal  Courts  have  power  to  issue  writs  not  specially  provided  by 
statute,  when  necessary  for  exercise  of  jurisdiction.  Re  Mas- 
sachusetts, 197  U.  S.  488,  49  L.  Ed.  485,  25  S.  Ct.  512. 

Federal  Courts,  jurisdiction  of,  action  against  Commissioner  is 
cause  arising  under  laws  providing  internal  revenue  and  un- 
der Laws  of  the  U.  S.  Do^vns  v.  Bidwell,  182  U.  S.  248,  45 
L.  Ed.  1088,  21  S.  Ct.  770;  Commissioners  of  Sinking  Fund  v. 
Buckner,  48  Fed.  533. 

Federal  Courts,  jurisdiction  of,  apparently  dependent  upon  diverse 
citizenship,  except  for  purposes  of  removal.  Cincinnati  v. 
Bettman,  102  Fed.  16;  Collector  v.  Hubbard,  12  Wall.  8,  20 
L.  Ed  272;  City  of  Phila.  v.  Collector,  5  Wall.  720,  18  L.  Ed. 
614. 

Federal  Courts,  jurisdiction  of,  complete,  regardless  of  allowance, 
or  nature  of  claims.  Christie  St.  Commissioners  Co.  v.  U.  S., 
136  Fed.  326,  69  C.  C.  A.  464;  Muskrat  v.  U.  S.,  219  U.  S.  358, 
55  L.  Ed.  248. 

Federal  Courts,  jurisdiction  of,  exists  where  federal  question  is 
involved,  without  regard  to  citizenship  of  parties.  Dinsmore 
V.  Southern  Exp.  Co.,  92  Fed.  714,  29  L.  Ed.  515,  6  S.  Ct.  304. 

Federal  Courts,  jurisdiction  of,  not  affected  by  amount  of  claim. 
Ames  V.  Hager,  36  Fed.  129,  1  L.  R.  A.  377,  13  Sawy.  473; 
U.  S.  V.  Mooney,  116  U.  S.  106;  Downs  v.  Bidwell,  182  U.  S. 
248,  45  L.  Ed.  1088,  21  S.  Ct.  770. 

Federal  Courts,  removal  to,  on  motion  of  defendants,  may  be  had 
in  every  case  brought  imder  this  section.  Tennessee  v.  Davis, 
100  U.  S.  257,  25  L.  Ed.  648;  So.  Pac.  R.  R.  Co.  v.  Cal,  118 
U.  S.  112,  30  L.  Ed.  103,  6  S.  Ct.  993;  Starin  v.  N.  Y.,  115 
U.  S.  257,  29  L.  Ed.  388,  6  S.  Ct.  28;  Cohens  v.  Va.,  6  Wheat. 


162  FEDERAL   INCOME   TAX    LAW 

264, 5  L.  Ed.  257;  Jetton  v.  University,  208  U.  S.  498, 52  L.  Ed. 
584. 

Interest,  claim  for,  barred  by  acceptance  of  refund.  Stewart  v. 
Barnes,  153  U.  S.  456,  38  L.  Ed.  781,  14  S.  Ct.  849. 

Interest  not  allowed,  in  default  of  protest.  Comrs.  v.  Buckner,  48 
Fed.  533. 

Interest  on  claim  should  be  allowed  from  date  of  payment.  Conant 
V.  Kinney,  162  Fed.  580;  Treat  v.  Farmers'  Loan  &  Trust  Co., 
185  Fed.  760;  10  I.  R.  R.  57. 

Interest  on  judgment  allowed  from  date  of  rendition.  Schell  v. 
Cochran,  107  U.  S.  625,  27  L.  Ed.  543. 

Interest  on  judgment,  liability  of  government  for,  must  be  statu- 
tory.   White  V.  Arthur,  10  Fed.  80,  20  Blatch.  237. 

Irregularity,  see  Claim. 

Judgment  against  collector  payable  directly  to  plaintiff.  U.  S.  v. 
Frericlis,  124  U.  S.  315,  31  L.  Ed.  471,  8  S.  Ct.  514. 

Judgment  against  collector,  United  States  not  bound  by,  when 
having  had  neither  actual,  nor  constructive  notice.  Dunne- 
gan  V.  U.  S.,  17  Ct.  CI.  247. 

Judgment  against  officers  for  taxes,  damages,  and  costs,  payable 
by  United  States.    Phila.  v.  Diehl,  5  Wall.  720,  18  L.  Ed.  614. 

Jurisdiction,  see  Cir.  Ct.  of  Appeals,  Court  of  Claims,  Federal 
Courts,  Mandamus. 

Liability,  criminal  or  in  trespass,  none  on  part  of  public  officer 
unless  acts  are  tortious  or  unauthorized.  U.  S.  v.  Cummings, 
130  U.  S.  452,  32  L.  Ed.  1029,  9  S.  Ct.  583;  Stacey  v.  Emery, 
97  U.  S.  642,  24  L.  Ed.  1035;  Averill  v.  Smith,  17  Wall.  82, 
21  L.  Ed.  613;  North  Carolina  v.  Kirkpatrick,  42  Fed.  689; 
North  Carolina  v.  Vanderford,  35  Fed.  282.  Cp.  Coblens  v. 
Abel,  1  Woolw.  293,  Fed.  Cas.  2926. 

Limitations,  statute  of,  begins  to  run  at  end  of  time  for  Commis- 
sioner's decision.  Cheatham  et  al.  v.  U.  S.,  92  U.  S.  85,  23 
L.  Ed.  561. 

Limitations,  statute  of,  prevented  from  running  by  informal  ap- 
plication.   14  Op.  Atty.  Gen.  615. 

Mandamus,  see  Federal  Courts:  see  §  3224,  citations. 

Mandamus,  authority  of  Supreme  Court  of  District  of  Columbia 
to  issue  in  all  cases  where  parties  entitled  by  common  law. 
U.  S.  V.  Schurz,  102  U.  S.  378,  26  L.  Ed.  167;  Buttcrworth  v. 
U.  S.,  112  U.S.  50,  28  L.  Ed.  656,  5  S.  Ct.  25. 

Mandamus,  Federal  Courts  without  power  to  issue.  McClimg  v. 
Sijliman,  6  Wheat.  598,  5  L.  Ed.  340. 

Manc^mus,  issuance  of,  presupposes  no  other  remedy  and  bars 


REVISED   STATUTES  163 

subsequent  action.  Kendall  v.  Stokes,  3  How.  (U.  S.)  87,  11 
L.  Ed.  506. 

Mandamus  issued  within  jurisdiction  of  court  may  be  enforced  by 
contempt  proceedings.  Ex  parte  Rowland,  104  U.-S.  612, 
26  L.  Ed.  861. 

Mandamus,  judgment  in  action  of,  reviewable  by  Supreme  Court. 
Hartman  v.  Greenhow,  102  U.  S.  675,  26  L.  Ed.  271. 

Mandamus  may  be  issued  to  compel  grant  by  tax  commissioners  of 
allowance  peremptorily  ordered  by  statute.  Comrs.  v.  Pem- 
sel,  L.  R.  1891  App.  C.  531. 

Mandamus,  State  Court  cannot  issue  against  United  States  officer. 
McClung  V.  Silliman,  6  Wheat.  598,  5  L.  Ed.  340. 

Mandamus,  Supreme  Court  of  District  of  Columbia,  will  issue  to 
compel  executive  ofl&cer  to  perform  mere  ministerial  duty  not 
involving  discretion.  U.  S.  v.  Black,  128  U.  S.  40,  32  L.  Ed. 
354,  9  S.  Ct.  12;  U.  S.  v.  Windom,  137  U.  S.  636,  34  L.  Ed.  811, 
11  S.  Ct.  197;  Decatur  v.  Paulding,  14  Pet.  497,  10  L.  Ed.  559; 
Kendall  v.  U.  S.,  12  Pet.  524, 9  L.  Ed.  1181. 

Objection,  see  Recovery. 

Protest,  see  Action,  Appeal,  Application,  Burden  of  Proof,  Deci- 
sion, Rejection. 

Protest,  form  of,  not  prescribed.    T.  D.,  1606,  Mch.  29,  1910. 

Protest  not  always  condition  precedent  to  refund.  Real  Estate 
Sav.  Bank  v.  U.  S.,  16  Ct.  CI.  335. 

Payments  not  voluntary  when  made  to  prevent  seizure  and  sale 
of  goods.  Swift  V.  U.  S.,  Ill  U.  S.  22,  28  L.  Ed.  341;  Maxwell 
V.  Griswold,  10  How.  (U.  S.)  242,  13  L.  Ed.  405;  Simons  v. 
U.  S.,  19  Ct.  CI.  601;  Hubbard  v.  Brainard,  35  Conn.  563. 

Payment  not  voluntary  when  made  upon  demand  of  officer  having 
power  to  distrain.  Hendy  v.  Soule,  1  Deady,  400,  Fed.  Cas. 
6359;  Adams  v.  U.  S.,  1  Ct.  CI.  306. 

Protest,  right  of,  not  to  be  denied.    T.  p.,  1606,  Mch.  29,  1910. 

Protest  unnecessary  after  appeal  from  assessment.  Hubbard  v. 
Kelly,  8  W.  Va.  48;  Northrup  v.  Shook,  10  Blatch.  243.  Cp. 
Nelson  v.  Carman,  5  Blatch.  511. 

Protest,  verbal,  sufficient.  Wright  v.  Blakeslic,  101  U.  S.  174,  25 
L.  Ed.  1048;  Shaefer  v.  Ketchum,  6  I.  R.  R.  4. 

Punitive  damages  recoverable  for  malicious  or  wanton  act.  Craw- 
ford V.  Eidman,  139  Fed.  992. 

Recovery  must  be  based  upon  ground  of  objection  stated  in  writ- 
ten protest.    Davies  v.  Arthur,  96  U.  S.  148. 

Rejection,  see  Action,  Appeal,  Application,  Burden  of  Proof,  De- 
cision, Protest. 


164:  FEDERAL   INCOME   TAX   LAW 

Rejection  by  Commissioner  sufficient  basis  of  action  against  col- 
lector. United  States  v.  Savings  Bank,  104  U.  S.  734,  26 
L.  Ed.  908;  First  Nat.  Bk.  of  Greencastle  v.  United  States, 
15  Ct.  CI.  225. 

Removal  to  Federal  Courts.    See  Federal  Courts. 

Res  judicata — Decision  on  tax,  one  year,  is  not,  as  to  succeeding 
years.  Lake  Shore,  etc.,  Ry.  Co.  v.  People,  46  Mich.  193,  9 
N.  W.  249. 

Right  of  taxpayer  not  destroyed  by  Commissioner's  form  of  pro- 
cedure.   Dunnegan  v.  U.  S.,  17  Ct.  CI.  247. 

Set-off,  excess  payment  cannot  be  allowed  as,  against  present  taxes 
after  expiration  of  period  for  application  for  refund.  16  Op. 
Atty.  Gen.  248. 

State  courts,  action  in  prohibition  applies  to,  as  well  as  to  federal 
courts.    Collector  v.  Hubbard,  12  Wall.  1-8,  20  L.  Ed.  272. 

Statutory  remedy  exclusive.  Arnson  v.  Murphy,  109  U.  S.  238,  27 
L.  Ed.  920,  3  S.  Ct.  184;  City  of  Phila.  v.  Collector,  5  Wall. 
720, 18  L.  Ed.  614;  Braun  v.  Sauerwein,  10  Wall.  218, 19  L.  Ed. 
895. 

Statutory  remedy,  modification  of  rule  as  to  exclusive  character 
of.  Cary  v.  Curtis,  3  How.  (U.  S.)  236,  11  L.  Ed.  576;  De 
Lima  v.  Bidwell,  182  U.  S.  128,  45  L.  Ed.  1041,  21  S.  Ct.  743; 
Pac.  Whaling  Co.  v.  U.  S.,  187  U.  S.  453,  47  L.  Ed.  253,  23 
S.  Ct.  154. 

Strict  compliance  with  statute  necessary.  Hastings  v.  Herold,  184 
Fed.  759;  Hubbard  v.  Kelly,  8  W.  Va.  46,  cited  in  65  W.  Va. 
69,  145;  Commissioners  v.  Buckner,  48  Fed.  533. 

Taxes,  see  Involuntary  Payments,  Voluntary  Payments. 

Torts,  see  Circuit  Ct.  of  Appeals,  Court  of  Claims,  Liability,  Tres- 
pass, United  States. 

Trespass,  see  Liability. 

Trespass,  appeal  to  Commissioner  not  condition  precedent  to  ac- 
tion for.    Erskinc  v.  Hohnbach,  14  Wall.  613,  20  L.  Ed.  745. 

Trespass — Receipt  of  taxes  paid  imder  protest  does  not  constitute. 
Armour  v.  Roberts,  151  Fed.  846. 

Trespass,  when  action  for,  could  not  be  brought.  Haffin  v.  Mason, 
15  Wall.  671,  21  L.  Ed.  196. 

United  States,  action  against,  in  Court  of  Claims,  may  be  based 
on  allowance  by  Commissioner.  Logan  County  v.  U.  S.,  169 
U.  S.  255,  42  L.  Ed.  737,  18  S.  Ct.  631. 

United  States,  action  to  recover  tax  may  be  commenced  directly 
against.  Emery  Bird  Thayer  Realty  Co.  v.  U.  S.,  198  Fed. 
242. 


REVISED   STATUTES  165 

United  States  not  a  necessary  party  defendant.  Conant  v.  Kinney, 
162  Fed.  580. 

United  States  not  liable  for  tortious  acta  of  officers,  unless  author- 
ized or  ratified.  Mann  v.  U.  S.,  32  Ct.  CI.  581;  Wash.  L.  &  T. 
Co.  V.  U.  S.,  39  Ct.  CI.  152;  U.  S.  v.  Cummings,  130  U.  S.  452, 
32  L.  Ed.  1029,  9  S.  Ct.  583. 

Voluntary  payments  cannot  be  recovered.  Chesebrough  v.  U.  S., 
192  U.  S.  253,  48  L.  Ed.  432,  24  S;  Ct.  262;  Phila.  v.  Diehl,  5 
Wall.  720,  18  L.  Ed.  614;  Elliott  v.  Swarthout,  10  Peters,  137, 
9  L.  Ed.  373. 

Sec.  3227.  No  suit  or  proceeding  for  the  recovery  of  any- 
internal  tax  alleged  to  have  been  erroneously  or  illegally 
assessed  or  collected,  or  of  any  penalty  alleged  to  have 
been  collected  without  authority,  or  of  any  sum  alleged 
to  have  been  excessive  or  in  any  manner  wrongfully  col- 
lected, shall  be  maintained  in  any  court,  unless  the  same 
is  brought  within  two  years  next  after  the  cause  of  action 
accrued:  Provided,  That  actions  for  such  claims  which 
accrued  prior  to  June  six,  eighteen  hundred  and  seventy- 
two,  may  be  brought  within  one  year  from  said  date;  and 
that  where  any  such  claim  was  pending  before  the  Com- 
missioner, as  provided  in  the  preceding  section,  an  action 
thereon  may  be  brought  within  one  year  after  such  deci- 
sion and  not  after.  But  no  right  of  action  which  was 
already  barred  by  any  statute  on  the  said  date  shall  be 
revived  by  this  section. 
Source:    Act  June  6,  1872,  c.  315,  §  14,  17  Stat.  257. 

Application  of  limitation  only  to  actions  brought  by  taxpayer. 

United  States  v.  Nebraska  Distilling  Co.,  80  Fed.  285. 
Commencement  of  action  must  be  within  statutory  period  in  case 
of  delay  for  more  than  six  months  in  Commissioner's  deci- 
sion.   Francis  v.  Slack,  4  Cliff.  186,  16  I.  R.  R.  134,  Fed.  Cas. 
5041. 
Limitations,  statute  of,  begins  to  run  at  end  of  time  for  Commis- 
sioner's decision.    Wright  v.  Blakeslee,  101  U.  S.  180,  25  L. 
Ed.  1048;  Schwarzchild  &  Sulzberger  v.  Rucker,  143  Fed.  656. 
Limitations,  statute  of,  begins  to  nm  from  date  of  Commissionei's 
decision.    Schwarzchild  &  Sulzberger  j).  Rucker,  143  Fed.  656. 
Limitations  of  this  Act  and  not  State  statutes  of  limitations,  con- 


166  FEDERAL  INCOME  TAX  LAW 

trol.  Amson  v.  Murphy,  109  U.  S.  238,  27  L.  Ed.  920,  3  S.  Ct. 
184. 

Limitations,  statute  of,  when  applicable  to  claim  delayed  by  public 
ofl&cer.    Hicks  v.  James,  48  Fed.  542. 

Limitations,  statute  of,  does  not  apply  where  Government  recog- 
nizes claim  and  draws,  but  holds  warrant  in  payment  thereof. 
Ray  V.  U.  S.,  50  Fed.  166. 

Limitations,  statute  of,  not  a  bar,  until  two  years  after  decision  of 
Commissioner,  although  delayed  more  than  six  months. 
Merck  v.  Treat,  174  Fed.  388. 

Limitations,  statute  of,  not  suspended  pending  appeal  to  Commis- 
sioner. Christie  St.  Com.  Co.  v.  U.  S.,  136  Fed.  326,  69 
C.  C.  A.  464. 

Limitations,  statute  of,  suspended  pending  decision  of  protest. 
Klumpp  V.  Thomas,  162  Fed.  853. 

Sec.  3228.  All  claims  for  the  refunding  of  any  internal 
tax  alleged  to  have  been  erroneously  or  illegally  assessed 
or  collected,  or  of  any  penalty  alleged  to  have  been  collec- 
ted without  authority,  or  of  any  sum  alleged  to  have  been 
excessive  or  in  any  manner  wrongfully  collected,  must  be 
presented  to  the  Commissioner  of  Internal  Revenue  within 
two  years  next  after  the  cause  of  action  accrued :  Provided 
That  claims  which  accrued  prior  to  June  six,  eighteen 
hundred  and  seventy-two,  may  be  presented  to  the 
Commissioner  at  any  time  within  one  year  from  said  date. 
But  nothing  in  this  section  shall  be  construed  to  revive 
any  right  of  action  which  was  already  barred  by  any 
statute  on  that  date. 

(Source;    Act  June  6,  1872,  c.  315,  §  44,  17  Stat.  257. 

Appeal,  filing  of,  with  Collector  constitutes  presentation  to  Com- 
missioner. U.  S.  V.  Real  Estate  Savings  Bank,  104  U.  S.  728, 
26  L.  Ed.  908,  17  Ct.  CI.  434. 

Sec.  3229.  The  Commissioner  of  Internal  Revenue, 
with  the  advice  and  consent  of  the  Secretary  of  the 
Treasury,  may  compromise  any  civil  or  criminal  case 
arising  under  the  internal  revenue  laws  instead  of  com- 
mencing suit  thereon;  and,  with  the  advice  and  consent 
of  the  said  Secretary  and  the  recommendation  of  the  At- 


REVISED   STATUTES  167 

torney-General,  he  may  compromise  any  such  case  after 
a  suit  thereon  has  been  commenced.  Whenever  a  compro- 
mise is  made  in  any  case  there  shall  be  placed  on  file  in  the 
office  of  the  Commissioner  the  opinion  of  the  SoHcitor  of 
Interna]  Revenue,  or  of  the  officer  acting  as  such,  with  his 
reasons  therefor,  with  a  statement  of  the  amount  of  tax 
assessed,  the  amount  of  additional  tax  or  penalty  imposed 
by  law  in  consequence  of  the  neglect  or  delinquency  of 
the  person  against  whom  the  tax  is  assessed,  and  the 
amount  actually  paid  in  accordance  with  the  terms  of  the 
compromise. 

Source:    Act  July  20,  1868,  c.  186,  §  102,  15  Stat.  166. 

Actions  referred  to,  are  those  brought  by  Government.  23  Op. 
Atty.  Gen.  507. 

Commissioner,  authority  of,  statement  and  construction  of  statu- 
tory rule.  12  Op.  Atty.  Gen.  472,  536;  13  Op.  Atty.  Gen. 
479. 

Commissioner  has  power  to  discontinue  judicial  proceeding  with- 
out consent  of  Secretary  or  Attorney  General.  12  Op.  Atty. 
Gen.  552. 

Compromise,  basis  of,  must  be  mutuaUty  of  concession — real 
doubt  as  to  legality  of  claim  or  ability  to  meet  it.  16  Op. 
Atty.  Gen.  249. 

Compromise,  motive  of,  may  be  justice,  equity,  or  pubUc  policy, 
as  well  as  pecuniary  advantage.    17  Op.  Atty.  Gen.  213. 

Construction  should  be  liberal  in  case  of  corporations  with  non- 
taxable incomes  failing  to  make  return.  29  Op.  Atty.  Gen. 
217-226. 

Discontinuance,  see  Commissioner. 

Discontinuance  of  suit  or  proceeding  not  a  compromise  requiring 
approval  of  attorney  general.    12  Op.  Atty.  Gen.  552. 

Judgment  upon  entry  of,  power  to  compromise  ceases.  13  Op. 
Atty.  Gen.  479. 

Secretary  of  the  Treasury,  power  of,  to  compromise  claims.  12 
Op.  Atty.  Gen.  472,  536;  13  Op.  Atty.  Gen.  479;  23  Op.  Atty. 
Gen.  20. 

Sec.  3230.  No  discontinuance  or  nolle  prosequi  of  any 
prosecution  under  section  three  thousand  two  hundred 
and  fifty-seven  shall  be  allowed  without  the  permission 


168  FEDERAL   INCOME   TAX    LAW 

in  writing  of  the  Secretary  of  the  Treasury  and  the  At- 
torney-General. 

Source:    Act  Mar.  31,  1868,  c.  41,  §  7,  15  Stat.  60. 

Sec.  3231.  It  shall  be  lawful  for  any  court  in  which 
any  suit  or  criminal  proceeding  arising  under  the  internal 
revenue  laws  may  be  pending,  to  continue  the  same  at 
any  stage  thereof,  for  good  cause  shown  on  motion  by  the 
district  attorney. 

.Source;    Act  July  20,  1868,  c.  186,  §  102,  15  Stat.  166. 

Sec.  3447.  Whenever  the  mode  or  time  of  assessing  or 
collecting  any  tax  which  is  imposed  is  not  provided  for, 
the  Commissioner  of  Internal  Revenue  may  establish  the 
same  by  regulation.  He  may  also  make  all  such  regula- 
tions, not  otherwise  provided  for,  as  may  have  become 
necessary  by  reason  of  any  alteration  of  law  in  relation 
to  internal  revpinue. 

Source:    Act  July  20,  1868,  c.  186,  §  101,  15  Stat.  166. 

Sec.  3462.  The  several  judges  oi  the  circuit  and  district 
courts  of  the  United  States,  and  conomissioners  of  the 
circuit  courts,  may,  within  their  respective  jurisdictions, 
issue  a  search-warrant,  authorizing  any  internal  revenue 
officer  to  search  any  premises  within  the  same,  if  such 
officer  makes  oath  in  writing  that  he  has  reason  to  believe, 
and  does  believe,  that  a  fraud  upon  the  revenue  has  been 
or  is  being  committed  upon  or  by  the  use  of  the  said  prem- 
ises. 

Source:    Act  July  13,  1866,  c.  IM,  §  15,  14  Stat.  152. 


APPENDIX 
FEDERAL  INCOME  TAX  ACTS 


ACT  OF  AUGUST  5,  I86I.1 

Chapter  XLV. — An  Act  to  Provide  Increased  Revenue  from 
Imports,  to  Pay  Interest  on  the  Public  Debt,  and  for 
Other  Purposes. 

**  *  *  *  *  *  * 

Sec.  49.  And  be  it  further  enacted,  That,  from  and  after 
the  first  day  of  January  next,  there  shall  be  levied,  col- 
lected, and  paid,  upon  the  annual  income  of  every  person 
residing  in  the  United  States,  whether  such  income  is  de- 
rived from  any  kind  of  property,  or  from  any  profession, 
trade,  employment,  or  vocation  carried  on  in  the  United 
States  or  elsewhere,  or  from  any  other  source  whatever,  if 
such  annual  income  exceeds  the  sum  of  eight  hundred  dol- 
lars, a  tax  of  three  per  centum  on  the  amount  of  such  excess 
of  such  income  above  eight  hundred  dollars:  Provided, 
That,  upon  such  portion  of  said  income  as  shall  be  derived 
from  interest  upon  treasury  notes  or  other  securities  of  the 
United  States,  there  shall  be  levied,  collected,  and  paid  a 
tax  of  one  and  one  half  per  centum.  Upon  the  income, 
rents,  or  dividends  accruing  upon  any  property,  securities, 
or  stocks,  owned  in  the  United  States  by  any  citizen  of  the 
United  States  residing  abroad,  there  shall  be  levied,  col- 
lected, and  paid  a  tax  of  five  per  centum,  excepting  that 
portion  of  said  income  derived  from  interest  on  Treasury 
notes  and  other  securities  of  the  Government  of  the 
United  States,  which  shall  pay  one  and  one  half  per 
centum.  The  tax  herein  provided  shall  be  assessed  upon 
the  annual  income  of  the  persons  hereinafter  named  for  the 
year  next  preceding  the  time  for  assessing  said  tax,  to  wit, 

1 12  U.  S.  Stat,  at  Large,  292. 

171 


172  APPENDIX  [Act,  Aug.  5,  1861 

the  year  next  preceding  the  first  of  January,  eighteen  hun- 
dred and  sixty- two;  and  the  said  taxes,  when  so  assessed 
and  made  pubHc,  shall  become  a  lien  on  the  property  or 
other  sources  of  said  income  for  the  amount  of  the  same, 
with  the  interest  and  other  expenses  of  collection  until 
paid:  Provided,  That  in  estimating  said  income,  all  na- 
tional, state,  or  local  taxes  assessed  upon  the  property, 
from  which  the  income  is  derived,  shall  be  first  deducted. 

Sec.  50.  And  he  it  further  enacted,  That  it  shall  be  the 
duty  of  the  President  of  the  United  States,  and  he  is  hereby 
authorized,  by  and  with  the  advice  and  consent  of  the  Sen- 
ate, to  appoint  one  principal  assessor  and  one  principal 
collector  in  each  of  the  States  and  Territories  of  the 
United  States,  and  in  the  District  of  Columbia,  to  assess 
and  collect  the  internal  duties  or  income  tax  imposed  by 
this  act,  with  authority  in  each  of  said  officers  to  appoint 
so  many  assistants  as  the  pubhc  service  may  require,  to 
be  approved  by  the  Secretary  of  the  Treasury.  The  said 
taxes  to  be  assessed  and  collected  under  such  regulations 
as  the  Secretary  of  the  Treasury  may  prescribe.  The  said 
collectors,  herein  authorized  to  be  appointed,  shall  give 
bonds,  to  the  satisfaction  of  the  Secretary  of  the  Treasury, 
in  such  sums  as  he  may  prescribe,  for  the  faithful  per- 
formance of  their  respective  duties.  And  the  Secretary  of 
the  Treasury  shall  prescribe  such  reasonable  compensa- 
tion for  the  assessment  and  collection  of  said  internal 
duties  or  income  tax  as  may  appear  to  him  just  and  proper; 
not,  however,  to  exceed  in  any  case  the  sum  of  two  thou- 
sand five  hundred  dollars  per  annum  for  the  principal  of- 
ficers herein  referred  to,  and  twelve  hundred  dollars  per 
annum  for  an  assistant.  The  assistant  collectors  herein 
provided  shall  give  bonds  to  the  satisfaction  of  the  princi- 
pal collector  for  the  faithful  performance  of  their  duties. 
The  Secretary  of  the  Treasury  is  further  authorized  to 
select  and  appoint  one  or  more  depositaries  in  each  State 
for  the  deposit  and  safe-keeping  of  the  moneys  arising  from 


FEDERAL  INCOME  TAX  ACTS  173 

the  taxes  herein  imposed,  when  collected,  and  the  receipt 
of  the  proper  officer  of  such  depositary  to  the  collector  for 
the  moneys  deposited  by  him  shall  be  the  proper  voucher 
for  such  collector  in  the  settlement  of  his  account  at  the 
Treasury  Department.  And  he  is  further  authorized  and 
empowered  to  make  such  officer  or  depositary  the  disburs- 
ing agent  of  the  Treasury  for  the  payment  of  all  interest 
due  to  the  citizens  of  such  State  upon  the  Treasury  notes 
or  other  Government  securities  issued  by  authority  of  law. 
And  he  shall  also  prescribe  the  forms  of  returns  to  be 
made  to  the  department  by  all  assessors  and  collectors 
appointed  under  the  authority  of  this  act.  He  shall  also 
prescribe  the  form  of  oath  or  obligation  to  be  taken  by  the 
several  officers  authorized  or  directed  to  be  appointed  and 
commissioned  by, the  President  under  this  act,  before  a 
competent  magistrate  duly  authorized  to  administer  oaths, 
and  the  form  of  the  return  to  be  made  thereon  to  the 
Treasury  Department. 

Sec.  51.  And  be  it  further  enacted,  That  the  tax  herein 
imposed  by  the  forty-ninth  section  of  this  act  shall  be  due 
and  payable  on  or  before  the  thirtieth  day  of  June,  in  the 
year  eighteen  hundred  and  sixty-two,  and  all  sums  due  and 
unpaid  at  that  day  shall  draw  interest  thereafter  at  the 
rate  of  six  per  centum  per  annum;  and  if  any  person  or 
persons  shall  neglect  or  refuse  to  pay  after  due  notice  said 
tax  assessed  against  him,  her,  or  them,  for  the  space  of 
more  than  thirty  days  after  the  same  is  due  and  payable, 
it  shall  be  lawful  for  any  collector  or  assistant  collector 
charged  with  the  duty  of  collecting  such  tax,  and  they  are 
hereby  authorized,  to  levy  the  same  on  the  visible  property 
of  any  such  person,  or  so  much  thereof  as  may  be  sufficient 
to  pay  such  tax,  with  the  interest  due  thereon,  and  the 
expenses  incident  to  such  levy  and  sale,  first  giving  thirty 
days'  public  notice  of  the  time  and  place  of  the  sale  thereof; 
and  in  case  of  the  failure  of  any  person  or  persons  author- 
ized to  act  as  agent  or  agents  for  the  collection  of  the  rents 


174  APPENDIX  [Act,  Aug.  5,  1861 

or  other  income  of  any  person  residing  abroad  shall  neglect 
or  refuse  (sic)  to  pay  the  tax  assessed  thereon  (having  had 
due  notice)  for  more  than  thirty  days  after  the  thirtieth  of 
June,  eighteen  hundred  and  sixty-two,  the  collector  or  his 
assistant,  for  the  district  where  such  property  is  located,  or 
rents  or  income  is  payable,  shall  be  and  hereby  is  author- 
ized to  levy  upon  the  property  itself,  and  to  sell  the  same, 
or  so  much  thereof  as  may  be  necessary  to  pay  the  tax  as- 
sessed, together  with  the  interest  and  expenses  incident  to 
such  levy  and  sale,  first  giving  thirty  days'  public  notice 
of  the  time  and  place  of  sale.  And  in  all  cases  of  the  sale 
of  property  herein  authorized,  the  conveyance  by  the  of- 
ficer authorized  to  make  the  sale,  duly  executed,  shall 
give  a  valid  title  to  the  purchaser,  whether  the  property 
sold  be  real  or  personal.  And  the  several  collectors  and 
assistants  appointed  under  the  authority  of  this  act  may, 
if  they  find  no  property  to  satisfy  the  taxes  assessed  upon 
any  person  by  authority  of  the  forty-ninth  section  of  this 
act,  and  which  such  person  neglects  to  pay  as  hereinbe- 
fore provided,  shall  have  power,  and  it  shall  be  their  duty, 
to  examine  under  oath  the  person  assessed  under  this  act,  or 
any  other  person,  and  may  (sic)  sell  at  public  auction,  after 
ten  days'  notice,  any  stock,  bonds,  or  choses  in  action,  be- 
longing to  such  person,  or  so  much  thereof  as  will  pay  such 
tax  and  the  expenses  of  such  sale;  and  in  case  he  refuses  to 
testify,  the  said  several  collectors  and  assistants  shall  have 
power  to  arrest  such  person  and  commit  him  to  prison,  to  be 
held  in  custody  until  the  same  shall  be  paid,  with  interest 
thereon,  at  the  rate  of  six  per  centum  per  annum,  from  the 
time  when  the  same  was  payable  as  aforesaid,  and  all  fees 
and  charges  of  such  commitment  and  custody.  And  the 
place  of  custody  shall  in  all  cases  be  the  same  provided  by 
law  for  the  custody  of  persons  committed  for  any  cause  by 
the  authority  of  the  United  States,  and  the  warrant  of  the 
collector,  stating  the  cause  of  commitment,  shall  be  suf- 
ficient authority  to  the  proper  officer  for  receiving  and 
keeping  such  person  in  custody  until  the  amount  of  said 


FEDERAL  INCOME  TAX  ACTS  175 

tax  and  interest,  and  all  fees  and  the  expense  of  such  cus- 
tody, shall  have  been  fully  paid  and  discharged;  which 
fees  and  expenses  shall  be  the  same  as  are  chargeable  un- 
der the  laws  of  the  United  States  in  other  cases  of  com- 
mitment and  custody.  And  it  shall  be  the  duty  of  such 
collector  to  pay  the  expenses  of  such  custody,  and  the 
same,  with  his  fees,  shall  be  allowed  on  settlement  of  his 
accounts.  And  the  person  so  committed  shall  have  the 
same  right  to  be  discharged  from  such  custody  as  may  be 
allowed  by  the  laws  of  the  State  or  Territory,  or  the  Dis- 
trict of  Columbia,  where  he  is  so  held  in  custody,  to  per- 
sons committed  under  the  laws  of  such  State  or  Territory, 
or  District  of  Columbia,  for  the  non-payment  of  taxes, 
and  in  the  manner  provided  by  such  laws;  or  he  may  be 
discharged  at  any  time  by  order  of  the  Secretary  of  the 
Treasury. 

Sec.  54.  And  he  it  further  enacted,  That  it  shall  be  the 
duty  of  the  collectors  aforesaid  in  their  respective  districts, 
and  they  are  hereby  authorized,  to  collect  the  duties 
imposed  by  this  act,  and  to  prosecute  for  the  recovery  of 
the  same,  and  for  the  recovery  of  any  sum  or  sums  which 
may  be  forfeited  by  virtue  of  this  act;  and  all  fines,  penal- 
ties, and  forfeitures  which  shall  be  incurred  by  force  of 
this  act,  shall  and  may  be  sued  for  and  recovered  in  the 
name  of  the  United  States  or  of  the  collector  within  whose 
district  any  such  fine,  penalty,  or  forfeiture  shall  have 
been  incurred,  by  bill,  plaint,  or  information;  one  moiety 
thereof  to  the  use  of  the  United  States,  and  the  other 
moiety  thereof  to  the  use  of  such  collector. 


ACT  OF  JULY  1,   1862.1 

Chapter  CXIX. — An  Act  to  Provide  Internal  Revenue  to 
Support  the  Government  and  to  Pay  Interest  on  the 
Public  Debt. 


Railroads,  Steamboats,  and  Ferry-boats 

Sec.  80.  And  be  it  further  enacted,  That  on  and  after  the 
first  day  of  August,  eighteen  hundred  and  sixty-two,  any 
person  or  persons,  firms,  companies,  or  corporations,  own- 
ing or  possessing,  or  having  the  care  or  management  of 
any  railroad  or  railroads  upon  which  steam  is  used  as  a 
propelling  power,  or  of  any  steamboat  or  other  vessel 
propelled  by  steam  power,  shall  be  subject  to  and  pay  a 
duty  of  three  per  centum  on  the  gross  amount  of  all  the 
receipts  of  such  railroad  or  railroads  or  steam  vessel  for 
the  transportation  of  passengers  over  and  upon  the  same; 
and  any  person  or  persons,  firms,  companies,  or  corpora- 
tions, owning  or  possessing,  or  having  the  care  or  manage- 
ment of  any  railroad  or  railroads  using  any  other  power 
than  steam  thereon,  or  owning,  possessing,  or  having  the 
care  or  management  of  any  ferry-boat,  or  vessel  used  as 
a  ferry-boat,  propelled  by  steam  or  horse-power,  shall  be 
subject  to  and  pay  a  duty  of  one  and  a  half  per  centum 
upon  the  gross  receipts  of  such  railroad  or  ferry-boat, 
respectively,  for  the  transportation  of  passengers  over  and 
upon  said  railroads,  steamboats,  and  ferry-boats,  re- 
spectively; and  any  person,  or  persons,  firms,  companies, 
or  corporations,  owning,  possessing,  or  having  the  care  or 
management  of  any  bridge  authorized  by  law  to  receive 

1 12  U.  S.  Stat,  at  Large,  432. 
176 


FEDERAL  INCOME  TAX  ACTS  177 

toll  for  the  transit  of  passengers,  beasts,  carriages,  teams, 
and  freight  of  any  description  over  such  bridge,  shall  be 
subject  to  and  pay  a  duty  of  three  per  centum  on  the  gross 
amount  of  all  theii;  receipts  of  every  description.  And 
the  owner,  possessor,  or  person  or  persons  having  the  care 
and  management  of  any  such  raihoad,  steamboat,  ferry- 
boat, or  other  vessel,  or  bridge,  as  aforesaid,  shall,  within 
five  days  after  the  end  of  each  and  every  month,  com- 
mencing as  hereinbefore  mentioned,  make  a  Ust  or  return 
to  the  assistant  assessor  of  the  district  within  which  such 
owner,  possessor,  company,  or  corporation  may  have  his 
or  its  place  of  business,  or  where  any  such  railroad,  steam- 
boat, ferry-boat,  or  bridge  is  located  or  belongs,  respec- 
tively, stating  the  gross  amount  of  such  receipts  for  the 
month  next  preceding,  which  return  shall  be  verified  by 
the  oath  or  affirmation  of  such  owner,  possessor,  manager, 
agent,  or  other  proper  officer,  in  the  manner  and  form  to 
be  prescribed  from  time  to  time  by  the  Commissioner  of 
Internal  Revenue,  and  shall  also,  monthly,  at  the  time 
of  making  such  return,  pay  to  the  collector  or  deputy 
collector  of  the  district  the  full  amount  of  duties  which 
have  accrued  on  such  receipts  for  the  month  aforesaid; 
and  in  case  of  neglect  or  refusal  to  make  said  lists  or  return 
for  the  space  of  five  days  after  such  return  should  be  made 
as  aforesaid,  the  assessor  or  assistant  assessor  shall  pro- 
ceed to  estimate  the  amount  received  and  the  duties 
payable  thereon,  as  hereinbefore  provided  in  other  cases 
of  delinquency  to  make  return  for  purposes  of  assessment; 
and  for  the  purpose  of  making  such  assessment,  or  of 
ascertaining  the  correctness  of  any  such  return,  the  books 
of  any  such  person,  company,  or  corporation  shall  be  sub- 
ject to  the  inspection  of  the  assessor  or  assistant  assessor 
on  his  demand  or  request  therefor;  and  in  case  of  neglect 
or  refusal  to  pay  the  duties  as  aforesaid  when  the  same 
have  been  ascertained  as  aforesaid,  for  the  space  of  five 
days  after  the  same  shall  have  become  payable,  the 
owner,  possessor,  or  person  having  the  management  as 


178  APPENDIX  [Act,  July  1,  1862 

aforesaid,  shall  pay,  in  addition,  five  per  centum  on  the 
amount  of  such  duties;  and  for  any  attempt  knowingly  to 
evade  the  payment  of  such  duties,  the  said  owner,  pos- 
sessor, or  person  having  the  care  or  management  as  afore- 
said, shall  be  liable  to  pay  a  penalty  of  one  thousand  dol- 
lars for  every  such  attempt,  to  be  recovered  as  provided  in 
this  act  for  the  recovery  of  penalties;  and  all  provisions 
of  this  act  in  relation  to  liens  and  collections  by  distraint 
not  incompatible  herewith,  shall  apply  to  this  section 
and  the  objects  therein  embraced:  Provided,  That  all  such 
persons,  companies,  and  corporations  shall  have  the 
right  to  add  the  duty  or  tax  imposed  hereby  to  their 
rates  of  fare  whenever  their  liability  thereto  may  com- 
mence, any  limitations  which  may  exist  by  law  or  by 
agreement  with  any  person  or  company  which  may  have 
paid,  or  be  liable  to  pay,  such  fare  to  the  contrary  not- 
withstanding. 

Railroad  Bonds 

Sec.  81.  And  he  it  further  enacted,  That  on  and  after 
the  first  day  of  July,  eighteen  hundred  and  sixty-two,  any 
person  or  persons  owning  or  possessing,  or  having  the  care 
or  management  of  any  railroad  company  or  railroad  cor- 
poration, being  indebted  for  any  sum  or  sums  of  money 
for  which  bonds  or  other  evidences  of  indebtedness  have 
been  issued,  payable  in  one  or  more  years  after  date, 
upon  which  interest  is,  or  shall  be,  stipulated  to  be  paid, 
or  coupons  representing  the  interest  shall  be  or  shall  have 
been  issued  to  be  paid,  and  all  dividends  in  scrip  or  money 
or  sums  of  money  thereafter  declared  due  or  payable  to 
stockholders  of  any  railroad  company,  as  part  of  the  earn- 
ings, profits,  or  gains  of  said  companies,  shall  be  subject 
to  and  pay  a  duty  of  three  per  centum  on  the  amoimt  of 
all  such  interest  or  coupons  or  dividends  whenever  the 
same  shall  be  paid;  and  said  railroad  companies  or  rail- 
road corporations,  or  any  person  or  persons  owning,  pos- 
sessing, or  having  the  care  or  management  of  any  railroad 


FEDEPAL  INCOME  TAX  ACTS  179 

company  or  railroad  corporation,  are  hereby  authorized 
and  required  to  deduct  and  withhold  from  all  payments 
made  to  any  person,  persons,  or  party,  after  the  first 
day  of  July,  as  aforesaid,  on  account  of  any  interest  or 
coupons  or  dividends  due  and  payable  as  aforesaid,  the 
said  duty  or  sum  of  three  per  centum;  and  the  duties 
deducted  as  aforesaid,  and  certified  by  the  president  or 
other  proper  officer  of  said  company  or  corporation,  shall  be 
a  receipt  and  discharge,  according  to  the  amount  thereof, 
of  said  railrcfad  companies  or  railroad  corporations,  and  the 
owners,  possessors,  and  agents  thereof,  on  dividends  and 
on  bonds  or  other  evidences  of  their  indebtedness,  upon 
which  interest  or  coupons  are  payable,  holden  by  any 
person  or  party  whatsoever,  and  a  list  or  return  shall  be 
made  and  rendered  within  thirty  days  after  the  time  fixed 
when  said  interest  or  coupons  or  dividends  become  due 
or  payable,  and  as  often  as  every  six  months,  to  the 
Commissioner  of  Internal  Revenue,  which  shall  contain 
a  true  and  faithful  account  of  the  duties  received  and 
chargeable,  as  aforesaid,  during  the  time  when  such 
duties  have  accrued  or  should  accrue,  and  remaining  un- 
accounted for;  and  there  shall  be  annexed  to  every  such 
list  or  return  a  declaration  under  oath  or  affirmation, 
in  manner  and  form  as  may  be  prescribed  by  the  Com- 
missioner of  Internal  Revenue,  of  the  president,  treasm-er, 
or  some  proper  officer  of  said  railroad  company  or  railroad 
corporation,  that  the  same  contains  a  true  and  faithful 
account  of  the  duties  so  withheld  and  received  during 
the  time  when  such  duties  have  accrued  or  should  accrue, 
and  not  accounted  for,  and  for  any  default  in  the  making 
or  rendering  of  such  list  or  return,  with  the  declaration 
annexed,  as  aforesaid,  the  person  or  persons  owning, 
possessing,  or  having  the  care  or  management  of  such 
railroad  company  or  railroad  corporation,  making  such 
default,  shall  forfeit,  as  a  penalty,  the  sum  of  five  hundred 
dollars;  and  in  case  of  any  default  in  making  or  rendering 
said  list,  or  of  any  default  in  the  payment  of  the  duty,  or 


180  APPENDIX  [Act,  July  1,  1862 

any  part  thereof,  accruing  or  which  should  accrue,  the 
assessment  and  collection  shall  be  made  according  to 
the  general  provisions  of  this  act. 

Banks,  Trust  Companies,  Savings  Institutions,  and 
Insurance  Companies 

Sec.  82.  And  he  it  further  enacted,  That  on  and  after 
the  first  day  of  July,  eighteen  hundred  and  sixty-two, 
there  shall  be  levied,  collected,  and  paid  by  all  banks, 
trust  companies,  and  savings  institutions,  and' by  all  fire, 
marine,  life,  inland,  stock,  and  mutual  insurance  com- 
panies, under  whatever  style  or  name  known  or  called, 
of  the  United  States  or  Territories,  specially  incorporated, 
or  existing  under  general  laws,  or  which  may  be  hereafter 
incorporated  or  exist  as  aforesaid,  on  all  dividends  in 
scrip  or  money  thereafter  declared  due  or  paid  to  stock- 
holders, to  policy-holders,  or  to  depositors,  as  part  of  the 
earnings,  profits,  or  gains  of  said  banks,  trust  companies, 
savings  institutions,  or  insurance  companies,  and  on  all 
sums  added  to  their  surplus  or  contingent  funds,  a  duty 
of  three  per  centum:  Provided,  That  the  duties  upon  the 
dividends  of  life  insurance  companies  shall  not  be  deemed 
due,  or  to  be  collected  until  such  dividends  shall  be  pay- 
able by  such  companies.  And  said  banks,  trust  com- 
panies, savings  institutions,  and  insurance  companies 
are  hereby  authorized  and  required  to  deduct  and  with- 
hold from  all  payments  made  to  any  person,  persons,  or 
party,  on  account  of  any  dividends  or  sums  of  money 
that  may  be  due  and  payable,  as  aforesaid,  after  the  first 
day  of  July,  eighteen  hundred  and  sixty-two,  the  said 
duty  of  three  per  centum.  And  a  list  or  return  shall  be 
made  and  rendered  within  thirty  days  after  the  time 
fixed  when  such  dividends  or  sums  of  money  shall  be 
declared  due  and  payable,  and  as  often  as  every  six 
months,  to  the  Commissioner  of  Internal  Revenue,  which 
shall  contain  a  true  and  faithful  account  of  the  amount 
of  duties  accrued  or  which  should  accrue  from  time  to 


FEDERAL  INCOME  TAX  ACTS  181 

time,  as  aforesaid,  during  the  time  when  such  duties  re- 
main unaccounted  for,  and  there  shall  be  annexed  to 
every  such  list  or  return  a  declaration,  under  oath  or 
affirmation,  to  be  made  in  form  and- manner  as  shall  be 
prescribed  by  the  Commissioner  of  Internal  Revenue, 
of  the  president,  or  some  other  proper  officer  of  said  bank, 
trust  company,  savings  institution,  or  insurance  company, 
respectively,  that  the  same  contains  a  true  and  faithful 
account  of  the  duties  which  have  accrued  or  should  accrue 
and  not  accounted  for,  and  for  any  default  in  the  delivery 
of  such  list  or  return,  with  such  declaration  annexed,  the 
bank,  trust  company,  savings  institution,  or  insurance 
company  making  such  default  shall  forfeit,  as  a  penalty, 
the  sum  of  five  hundred  dollars. 

Sec.  83.  And  be  it  further  enacted,  That  any  person  or 
persons  owning  or  possessing,  or  having  the  care  or  man- 
agement of  any  railroad  company  or  railroad  corporation, 
bank,  trust  company,  savings  institution,  or  insurance 
company,  as  heretofore  mentioned,  required  under  this 
act  to  make  and  render  any  list  or  return  to  the  Commis- 
sioner of  Internal  Revenue,  shall,  upon  rendering  the  same, 
pay  to  the  said  Commissioner  of  Internal  Revenue  the 
amount  of  the  duties  due  on  such  list  or  return,  and  in 
default  thereof  shall  forfeit  as  a  penalty  the  sum  of  five 
hundred  dollars;  and  in  case  of  neglect  or  refusal  to  make 
such  list  or  return  as  aforesaid,  or  to  pay  the  duties  as 
aforesaid,  for  the  space  of  thirty  days  after  the  time  when 
said  list  should  have  been  made  and  rendered,  or  when 
said  duties  shall  have  become  due  and  payable,  the  assess- 
ment and  collection  shall  be  made  according  to  the  general 
provisions  heretofore  prescribed  in  this  act. 


Sec.  84.  And  he  it  further  enacted,  That  on  the  first  day 
of  October,  anno  domini  eighteen  hundred  and  sixty-two, 
and  on  the  first  day  of  each  quarter  of  a  year  thereafter, 


182  APPENDIX  [Act,  July  1,  1862 

there  shall  be  paid  by  each  insurance  company,  whether 
inland  or  marine,  and  by  each  individual  or  association 
engaged  in  the  business  of  insurance  from  loss  or  damage 
by  fire,  or  by  the  perils  of  the  sea,  the  duty  of  one  per 
centum  upon  the  gross  receipts  for  premiums  and  assess- 
ments by  such  individual,  association,  or  company  dur- 
ing the  quarter  then  preceding;  and  like  duty  shall  be  paid 
by  the  agent  of  any  foreign  insurance  company  having  an 
office  or  doing  business  within  the  United  States. 

Sec.  85.  Returns   by   Insurance   Companies 
(Omitted,  as  unimportant.) 


Salaries  and  Pay  of  Officers  and  Persons  in  the 
Service  of  the  United  States 

Sec.  86.  And  he  it  further  enacted,  That  on  and  after  the 
first  day  of  August,  eighteen  hundred  and  sixty-two,  there 
shall  be  levied,  collected,  and  paid  on  all  salaries  of  officers, 
or  payments  to  persons  in  the  civil,  military,  naval,  or 
other  employment  or  service  of  the  United  States,  includ- 
ing senators  and  representatives  and  delegates  in  Congress, 
when  exceeding  the  rate  of  six  hundred  dollars  per  annum, 
a  duty  of  three  per  centum  on  the  excess  above  the  six 
hundred  dollars;  and  it  shall  be  the  duty  of  all  paymasters, 
and  all  disbursing  officers,  under  the  government  of  the 
United  States,  or  in  the  employ  thereof,  when  making  any 
payments  to  officers  and  persons  as  aforesaid,  or  upon 
settling  and  adjusting  the  accounts  of  such  officers  and 
persons,  to  deduct  and  withhold  the  aforesaid  duty  of 
three  per  centum,  and  shaU,  at  the  same  time,  make  a  cer- 
tificate stating  the  name  of  the  officer  or  person  from 
whom  such  deduction  was  made,  and  the  amount  thereof, 
which  shall  be  transmitted  to  the  office  of  the  Commis- 
sioner of  Internal  Revenue,  and  entered  as  part  of  the  in- 
ternal duties;  and  the  pay-roll,  receipts,  or  account  of 


FEDERAL  INCOME  TAX  ACTS  183 

officers  or  persons  paying  such  duty,  as  aforesaid,  shall  be 
made  to  exhibit  the  fact  of  such  payment. 


Advertisement 

Sec.  88.  And  he  it  further  enacted,  That  on  and  after  the 
first  day  of  August,  eighteen  hundred  and  sixty-two,  there 
shall  be  levied,  collected,  and  paid  by  any  person  or  per- 
sons, firm,  or  company,  publishing  any  newspaper,  maga- 
zine, review,  or  other  literary,  scientific,  or  news  publi- 
cation, issued  periodically,  on  the  gross  receipts  for  all 
advertisements,  or  all  matters  for  the  insertion  of  which  in 
said  newspaper  or  other  publication  as  aforesaid,  or  in 
extras,  supplements,  sheets,  or  fly-leaves  accompanying 
the  same,  pay  is  required  or  received,  a  duty  of  three  per 
centum;  and  the  person  or  persons,  firm,  or  company,  own- 
ing, possessing,  or  having  the  care  or  management  of  any 
and  every  such  newspaper  or  other  publication,  as  afore- 
said, shall  make  a  list  or  return  quarterly,  commencing  as 
heretofore  mentioned,  containing  the  gross  amount  of  re- 
ceipts as  aforesaid,  and  the  amount  of  duties  which  have 
accrued  thereon,  and  render  the  same  to  the  assistant 
assessor  of  the  respective  districts  where  such  newspaper, 
magazine,  review,  or  other  Uterary  or  news  publication  is 
or  may  be  published,  which  list  or  return  shall  have  an- 
nexed a  declaration,  under  oath  or  affirmation,  to  be  made 
according  to  the  manner  and  form  which  may  be  from 
time  to  time  prescribed  by  the  Commissioner  of  Internal 
Revenue,  or  the  owner,  possessor,  or  person  having  the 
care  or  management  of  such  newspaper,  magazine,  review, 
or  other  publication,  as  aforesaid,  that  the  same  is  true 
and  correct,  and  shall  also,  quarterly  and  at  the  time  of 
making  said  list  or  return,  pay  to  the  collector  or  deputy 
collector  of  the  district,  as  aforesaid,  the  full  amount  of 
said  duties;  and  in  case  of  neglect  or  refusal  to  comply  with 
any  of  the  provisions  contained  in  this  section,  or  to  make 
and  render  said  list  or  return,  as  aforesaid,  for  the  space 


184  APPENDIX  [Act,  July  1,  1S62 

of  thirty  days  after  the  time  when  said  list  or  return  ought 
to  have  been  made,  as  aforesaid,  the  assistant  assessor  of 
the  respective  districts  shall  proceed  to  estimate  the  duties, 
as  heretofore  provided  in  other  cases  of  delinquency;  and 
in  case  of  neglect  or  refusal  to  pay  the  duties,  as  aforesaid, 
for  the  space  of  thirty  days  after  said  duties  become  due 
and  payable,  said  owner,  possessor,  or  person  or  persons 
having  the  care  or  management  of  said  newspapers  or 
publications,  as  aforesaid,  shall  pay,  in  addition  thereto, 
a  penalty  of  five  per  centum  on  the  amount  due;  and  in 
case  of  fraud  or  evasion,  whereby  the  revenue  is  attempted 
to  be  defrauded  or  the  duty  withheld,  said  owners,  pos- 
sessors, or  person  or  persons  having  the  care  or  manage- 
ment of  said  newspapers  or  other  publications,  as  afore- 
said, shall  forfeit  and  pay  a  penalty  of  five  hundred  dollars 
for  each  offence,  or  for  any  sum  fraudulently  unaccounted 
for;  and  all  provisions  in  this  act  in  relation  to  liens,  as- 
sessments, and  collection,  not  incompatible  herewith, 
shall  apply  to  this  section  and  the  objects  herein  embraced: 
Provided,  That  in  all  cases  where  the  rate  or  price  of  ad- 
vertising is  fixed  by  any  law  of  the  United  States,  or  Terri- 
tory, it  shall  be  lawful  for  the  company,  person  or  persons 
publishing  said  advertisements,  to  add  the  duty  or  tax 
imposed  by  this  act  to  the  price  of  said  advertisements, 
any  law,  as  aforesaid,  to  the  contrary  notwithstanding: 
Provided  further,  That  the  receipts  for  advertisements  to 
the  amount  of  one  thousand  dollars,  by  any  person  or  per- 
sons, firm  or  company,  publishing  any  newspaper,  maga- 
zine, review,  or  other  literary,  scientific,  news  publication, 
issued  periodically,  shall  be  exempt  from  duty:  And  pro- 
vided further,  That  all  newspapers  whose  circulation  does 
not  exceed  two  thousand  copies  shall  be  exempted  from 
all  taxes  for  advertisements. 

Income  Duty 

Sec.  89.  And  be  it  further  enacted,  That  for  the  purpose 
of  modifying  and  re-enacting,  as  hereinafter  provided,  so 


FEDERAL  INCOME  TAX  ACTS  185 

much  of  an  act,  entitled  "An  act  to  provide  increased  rev- 
enue from  imports  to  pay  interest  on  the  public  debt,  and 
for  other  purposes,"  approved  fifth  of  August,  eighteen 
hundred  and  sixty-one,  as  relates  to  income  tax;  that  is  to 
say,  sections  forty-nine,  fifty  (except  so  much  thereof  as 
relates  to  the  selection  and  appointment  of  depositaries), 
and  fifty-one,  be,  and  the  same  are  hereby,  repealed. 

Sec.  90.  And  be  it  further  enacted,  That  there  shall  be 
levied,  collected,  and  paid  annually,  upon  the  annual 
gains,  profits,  or  income  of  every  person  residing  in  the 
United  States,  whether  derived  from  any  kind  of  property, 
rents,  interest,  dividends,  salaries,  or  from  any  profession, 
trade,  employment,  or  vocation  carried  on  in  the  United 
States  or  elsewhere,  or  from  any  other  source  whatever, 
except  as  hereinafter  mentioned,  if  such  annual  gains, 
profits,  or  income  exceed  the  sima  of  six  hundred  dollars, 
and  do  not  exceed  the  sum  of  ten  thousand  dollars,  a  duty 
of  three  per  centum  on  the  amount  of  such  annual  gains, 
profits,  or  income  over  and  above  the  said  sum  of  six  hun- 
dred dollars;  if  said  income  exceeds  the  siun  of  ten  thou- 
sand dollars,  a  duty  of  five  per  centum  upon  the  amount 
thereof  exceeding  six  hundred  dollars,  and  upon  the  an- 
nual gains,  profits,  or  income,  rents,  and  dividends  ac- 
cruing upon  any  property,  securities,  and  stocks  owned  in 
the  United  States  by  any  citizen  of  the  United  States,  re- 
siding abroad,  except  as  hereinafter  mentioned,  and  not 
in  the  employment  of  the  government  of  the  United  States, 
there  shall  be  levied,  collected,  and  paid  a  duty  of  five  per 
centum. 

Sec.  91.  And  be  it  further  enacted,  That  in  estimating 
said  annual  gains,  profits,  or  income,  whether  subject  to  a 
duty,  as  provided  in  this  act,  of  three  per  centum,  or  of 
five  per  centum,  all  other  national,  state,  and  local  taxes, 
lawfully  assessed  upon  the  property  or  other  sources  of  in- 
come of  any  person  as  aforesaid,  from  which  said  annual 
gains,  profits,  or  income  of  such  person  is  or  should  be  de- 


1S6  APPENDIX  [Act,  July  1,  1$62 

rived,  shall  be  first  deducted  from  the  gains,  profits,  or  in- 
come of  the  person  or  persons  who  actually  pay  the  same, 
whether  owner  or  tenant,  and  all  gains,  profits,  or  income 
derived  from  salaries  of  officers,  or  payments  to  persons 
in  the  civil,  military,  naval,  or  other  service  of  the  United 
States,  including  senators,  representatives,  and  delegates 
in  Congress,  above  six  hundred  dollars,  or  derived  from  in- 
terest or  dividends  on  stock,  capital,  or  deposits  in  any 
bank,  trust  company,  or  savings  institution,  insurance, 
gas,  bridge,  express,  telegraph,  steamboat,  ferry-boat,  or 
railroad  company,  or  corporation,  or  on  any  bonds  or  other 
evidences  of  indebtedness  of  any  raiboad  company  or 
other  corporation,  which  shall  have  been  assessed  and  paid 
by  said  banks,  trust  companies,  savings  institutions,  in- 
surance, gas,  bridge,  telegraph,  steamboat,  ferry-boat, 
express,  or  railroad  companies,  as  aforesaid,  or  derived 
from  advertisements,  or  on  any  articles  manufactured, 
upon  which  specific,  stamp  or  ad  valorem  duties  shall  have 
been  directly  assessed  or  paid,  shall  also  be  deducted;  and 
the  duty  herein  provided  for  shall  be  assessed  and  col- 
lected upon  the  income  for  the  year  ending  the  thirty-first 
day  of  December  next  preceding  the  time  for  levying  and 
collecting  said  duty,  that  is  to  say,  on  the  first  day  of  May, 
eighteen  hundred  and  sixty-three,  and  in  each  year  there- 
after: Provided,  That  upon  such  portion  of  said  gains,  pro- 
fits, or  income,  whether  subject  to  a  duty  as  provided  in 
this  act  of  three  per  centum  or  of  five  per  centum,  which 
shall  be  derived  from  interest  upon  notes,  bonds,  or  other 
securities  of  the  United  States,  there  shall  be  levied,  col- 
lected, and  paid  a  duty  not  exceeding  one  and  one-half  of 
one  per  centum,  anything  in  this  act  to  the  contrary  not- 
withstanding. 

Sec.  92.  And  he  it  further  enacted,  That  the  duties  on 
incomes  herein  imposed  shall  be  due  and  payable  on  or 
before  the  thirtieth  day  of  June,  in  the  year  eighteen  hun- 
dred and  sixty-three,  and  in  each  year  thereafter  until 


FEDERAL  INCOME  TAX  ACTS  187 

and  including  the  year  eighteen  hundred  and  sixty-six 
and  no  longer;  and  to  any  sum  or  sums  annually  due  and 
unpaid  for  thirty  days  after  the  thirtieth  of  June  as 
aforesaid,  and  for  ten  days  after  demand  thereof  by  the 
collector,  there  shall  be  levied  in  addition  thereto  the  sum 
of  five  per  centum  on  the  amount  of  duties  unpaid,  as  a 
penalty,  except  from  the  estates  of  deceased  and  insolvent 
persons;  and  if  any  person  or  persons,  or  party,  liable  to 
pay  such  duty,  shall  neglect  or  refuse  to  pay  the  same, 
the  amount  due  shall  be  a  lien  in  favor  of  the  United  States 
from  the  time  it  was  so  due  until  paid,  with  the  interest, 
penalties,  and  costs,  that  may  accrue  in  addition  thereto 
upon  all  the  property,  and  rights  to  property,  stocks, 
securities,  and  debts  of  every  description  from  which  the 
income  upon  which  said  duty  is  assessed  or  levied  shall 
have  accrued,  or  may  or  should  accrue;  and  in  default  of 
the  payment  of  said  duty  for  the  space  of  thirty  days, 
after  the  same  shall  have  become  due,  and  be  demanded 
as  aforesaid,  said  lien  may  be  enforced  by  distraint  upon 
such  property,  rights  to  property,  stocks,  securities,  and 
evidences  of  debt,  by  whomsoever  holden;  and  for  this 
purpose  the  Commissioner  of  Internal  Revenue,  upon  the 
certificate  of  the  collector  or  deputy  collector  that  said 
duty  is  due  and  unpaid  for  the  space  of  ten  days  after 
notice  duly  given  of  the  levy  of  such  duty,  shall  issue  a 
warrant  in  form  and  manner  to  be  prescribed  by  said  Com- 
missioner of  Internal  Revenue,  under  the  directions  of  the 
Secretary  of  the  Treasury,  and  by  virtue  of  such  warrant 
there  may  be  levied  on  such  property,  rights  to  property, 
stocks,  securities,  and  evidences  of  debt,  a  further  sum  to 
be  fixed  and  stated  in  such  warrant,  over  and  above  the 
said  annual  duty,  interest,  and  penalty  for  nonpayment, 
sufficient  for  the  fees  and  expenses  of  such  levy.  And  in  all 
cases  of  sale,  as  aforesaid,  the  certificate  of  such  sale  by  the 
collector  or  deputy  collector  of  the  sale,  shall  give  title  to 
the  purchaser,  of  all  right,  title,  and  interest  of  such  delin- 
quent in  and  to  such  property,  whether  the  property  be 


188  APPENDIX  [Act,  July  1,  1862 

real  or  personal;  and  where  the  subject  of  sale  shall  be 
stocks,  the  certificate  of  said  sale  shall  be  lawful  authority 
and  notice  to  the  proper  corporation,  company,  or  associa- 
tion, to  record  the  same  on  the  books  or  records,  in  the 
same  manner  as  if  transferred  or  assigned  by  the  person  or 
party  holding  the  same,  to  issue  new  certificates  of  stock 
therefor  in  lieu  of  any  original  or  prior  certificates,  which 
shall  be  void  whether  cancelled  or  not ;  and  said  certificates 
of  sale  of  the  collector  or  deputy  collector,  where  the  sub- 
ject of  sale  shall  be  securities  or  other  evidences  of  debt, 
shall  be  good  and  valid  receipts  to  the  person  or  party 
holding  the  same,  as  against  any  person  or  persons,  or 
other  party  holding,  or  claiming  to  hold,  possession  of  such 
securities  or  other  evidences  of  debt. 

Sec.  93.  And  he  it  further  enacted,  That  it  shall  be  the 
duty  of  all  persons  of  lawful  age,  and  all  guardians  and 
trustees,  whether  such  trustees  kre  so  by  virtue  of  their 
office  as  executors,  administrators,  or  other  fiduciary 
capacity,  to  make  return  in  the  list  or  schedule,  as  pro- 
vided in  this  act,  to  the  proper  officer  of  internal  revenue, 
of  the  amount  of  his  or  her  income,  or  the  income  of 
such  minors  or  persons  as  may  be  held  in  trust  as  afore- 
said, according  to  the  requirements  hereinbefore  stated, 
and  in  case  of  neglect  or  refusal  to  make  such  return,  the 
assessor  or  assistant  assessor  shall  assess  the  amount  of  his 
or  her  income,  and  proceed  thereafter  to  collect  the  duty 
thereon  in  the  same  manner  as  is  provided  for  in  other 
cases  of  neglect  and  refusal  to  furnish  lists  or  schedules 
in  the  general  provisions  of  this  act,  where  not  otherwise 
incompatible,  and  the  assistant  assessor  may  increase  the 
amount  of  the  list  or  return  of  any  party  making  such 
return,  if  he  shall  be  satisfied  that  the  same  is  understated : 
Provided,  That  any  party,  in  his  or  her  own  behalf,  or  as 
guardian  or  trustee,  as  aforesaid,  shall  be  permitted  to 
declare,  under  oath  or  affirmation,  the  form  and  manner 
of  which  shall  be  prescribed  by  the  Commissioner  of  In- 


FEDERAL  INCOME  TAX  ACTS  189 

ternal  Revenue,  that  he  or  she  was  not  possessed  of  an 
income  of  six  hundred  dollars,  liable  to  be  assessed  ac- 
cording to  the  provisions  of  this  act,  or  that  he  or  she  has 
been  assessed  elsewhere  and  (sic)  the  same  year  for  an  in- 
come duty,  under  authority  of  the  United  States,  and  shall 
thereupon  be  exempt  from  an  income  duty;  or,  if  the  list 
or  return  of  any  party  shall  have  been  increased  by  the 
assistant  assessor,  in  manner,  as  aforesaid,  he  or  she  may 
be  permitted  to  declare,  as  aforesaid,  the  amount  of  his 
or  her  annual  income,  or  the  amount  held  in  trust,  as 
aforesaid,  liable  to  be  assessed,  as  aforesaid,  and  the  same 
so  declared  shall  be  received  as  the  sum  upon  which  duties 
are  to  be  assessed  and  collected. 


ACT  OF  MARCH  3,  1863.  ^ 

Chapter  LXXIV. — An  Act  to  Amend  an  Act  entitled  "An 
Act  to  Provide  Internal  Revenue  to  Support  the  Government 
and  Pay  Interest  on  the  Public  Debt,"  Approved  July  First, 
Eighteen  Hundred  and  Sixty-two,  and  for  other  Purposes. 

Be  it  enacted,    ******** 

That  section  ninety-one  be  amended  by  striking  out 
the  word  ''gas"  wherever  it  occurs,  and  by  strking  out 
the  words  "or  on  any  articles  manufactured"  after  the 
word  '  *  advertisements . ' ' 

That  section  ninety-three  be  amended  so  that  in  case 
of  neglect  or  refusal  to  make  the  returns  referred  to  in 
said  section  the  proceedings  thereafter  for  the  assessment 
and  collection  of  the  duty  shall  be  in  the  same  manner 
as  provided  for  in  other  cases  of  neglect. 

Sec.  3.  And  be  it  further  enacted.  That  any  person  or 
persons,  firm,  company,  or  corporation,  who  shall  issue 
tickets,  or  contracts  of  insurance  against  fatal  or  non- 
fatal injury  to  persons  while  travelling  by  land  or  water, 
shall  pay  a  duty  of  one  per  centum  on  the  gross  amount 
of  all  the  receipts  for  such  insurance,  and  shall  be  subject 
to  all  the  provisions  and  regulations  of  existing  law  appli- 
cable thereto,  in  relation  to  insurance  companies:  Provided, 
That  no  stamp  duty  shall  be  required  upon  tickets  or  con- 
tracts of  insurance  as  aforesaid,  when  hmited  to  fatal  or 
non-fatal  injury  to  persons  while  travelhng. 

******** 

Sec.  8.  And  be  it  further  enacted.  That,  on  and  after  the 
passage  of  this  act,  any  person  or  persons  owning  or  pos- 

1 12  U.  S.  Stat,  at  Large,  713. 
190 


FEDERAL  INCOME 'TAX  ACTS  191 

sessing,  or  having  the  care  or  management  of  any  canal 
company  or  canal  navigation  or  slack-water  corporation, 
or  turnpike  companies,  being  indebted  for  any  sum  or 
sums  of  money  for  which  bonds  or  other  evidences  of  in- 
debtedness have  been  issued,  payable  in  one  or  more 
years  after  date,  upon  which  interest  is,  or  shall  be, 
stipulated  to  be  paid,  or  coupons  representing  the  interest, 
shall  be  or  shall  have  been  issued  to  be  paid;  and  all  divi- 
dends in  scrip  or  money,  or  sums  of  money  thereafter 
declared  due  or  payable  to  stockholders  of  any  canal 
navigation,  or  slack-water  or  turnpike  company,  as  part 
of  the  earning,  profits,  or  gains,  of  said  companies  shall 
be  subject  to  and  pay  a  duty  of  three  per  centum  on  the 
amount  of  all  such  interest,  or  coupons,  or  dividends, 
whenever  the  same  shall  be  paid;  and  said  canal  com- 
panies, or  canal  navigation,  or  slack-water  corporations, 
or  turnpike  companies,  or  any  person  or  persons  owning, 
possessing,  or  having  the  care  or  management  of  any  canal 
company,  or  canal  navigation  or  slack-water  corporation, 
or  turnpike  company,  are  hereby  authorized  and  required 
to  deduct  and  withhold  from  all  payments  made  to  any 
person,  persons,  or  party,  after  the  first  day  of  July,  as 
aforesaid,  on  account  of  any  interest,  or  coupons,  or 
dividends  due  and  payable,  as  aforesaid,  the  said  duty 
or  sum  of  three  per  centum;  and  the  duties  deducted,  as 
aforesaid,  and  certified  by  the  president  or  other  proper 
officer  of  said  company  or  corporation,  shall  be  a  receipt 
and  discharge,  according  to  the  amount  thereof,  of  said 
canal  companies  or  canal  navigation,  or  slack-water  cor- 
porations, or  turnpike  companies,  and  the  owners,  pos- 
sessors, and  agents  thereof  on  dividends  and  on  bonds  or 
other  evidences  of  their  indebtedness  upon  which  interest 
or  coupons  are  payable,  holden  by  any  person  or  party 
whatsoever,  and  a  list  or  return  shall  be  made  and  ren- 
dered within  thirty  days  after  the  time  fixed  when  said 
interest  or  coupons  or  dividends  become  due  or  payable, 
and  as  often  as  every  six  months,  to  the  Commissioner  of 


192  APPENDIX  [Act,  Mch.  3,  1863 

Internal  Revenue,  which  shall  contain  a  true  and  faithful 
account  of  the  duties  received  and  chargeable,  as  afore- 
said, during  the  time  when  such  duties  have  accrued  or 
should  accrue,  and  remaining  unaccounted  for;  and  there 
shall  be  annexed  to  every  such  list  or  return  a  declaration, 
under  oath  of  affirmation,  in  manner  and  form  as  may  be 
prescribed  by  the  commissioner  of  internal  revenue,  of 
the  president,  treasurer,  or  some  proper  officer  of  said 
canal  company, -or  canal  or  navigation  and  slack-water 
corporation  or  turnpike  companies,  that  the  same  con- 
tain a  true  and  faithful  account  of  the  duties  so  withheld 
and  received  during  the  time  when  such  duties  have 
accrued  or  should  accrue,  and  not  accounted  for;  and  for 
any  default  in  the  making  or  rendering  of  such  list  or 
return,  with  the  declaration  annexed,  as  aforesaid,  the 
person  or  persons  owning,  possessing,  or  having  the  care 
or  management  of  such  canal  company  or  canal,  naviga- 
tion or  slack-water  corporation  or  turnpike  companies, 
making  such  default,  shall  forfeit,  as  a  penalty,  the  sum 
of  five  hundred  dollars ;  and  in  case  of  any  default  in  mak- 
ing or  rendering  said  list,  or  of  any  default  in  the  payment 
of  the  duty,  or  any  part  thereof,  accruing  or  which  should 
accrue,  the  assessment  and  collection  shall  be  made  ac- 
cording to  the  general  provisions  of  the  act  to  which  this 
act  is  an  amendment. 

Sec.  9.  And  be  it  further  enacted,  That  any  person  or  per- 
sons, firms,  companies,  or  corporations,  owning  or  possess- 
ing, or  having  the  care  or  management  of  any  ferry-boat, 
or  vessel  used  as  a  ferry-boat,  propelled  by  steam  or  horse- 
power, in  Heu  of  the  duties  now  imposed  by  law,  shall  be 
subject  to  pay  a  duty  of  one  and  one-half  of  one  per  cen- 
tum upon  the  gross  receipts  of  such  ferry-boat;  and  the 
return  and  payment  thereof  shall  be  made  in  the  manner 
prescribed  in  the  act  to  which  this  act  is  an  amendment. 

Sec.  10.  And  be  it  further  enacted,  That  on  and  after  the 
first  day  of  April,  eighteen  hundred  and  sixty-three,  any 


FEDERAL  INCOME  TAX  ACTS  193 

person  or  persons,  firms,  companies,  or  corporations  carry- 
ing on  or  doing  an  express  business  shall,  in  lieu  of  the  tax 
and  stamp  duties  imposed  by  existing  laws,  be  subject  to 
and  pay  a  duty  of  two  per  centum  on  the  gross  amount  of 
all  the  receipts  of  such  express  business,  and  shall  be  sub- 
ject to  the  same  provisions,  rules,  and  penalties,  as  are 
prescribed  in  section  eighty  of  the  act  to  which  this  is  an 
amendment,  for  the  persons,  firms,  companies,  or  corpora- 
tions owning  or  possessing  or  having  the  management  of 
railroads,  steamboats,  and  ferry-boats;  and  all  acts  or 
part[s]  of  acts  inconsistent  herewith  are  hereby  repealed. 

Sec.  11.  And  be  it  further  enacted,  That  in  estimating 
the  annual  gains,  profit,  or  income,  of  any  person,  under 
the  act  to  which  this  act  is  an  amendment,  the  amount 
actually  paid  by  such  person  for  the  rent  of  the  dwelling- 
house  or  estate  on  which  he  resides  shall  be  first  deducted 
from  the  gains,  profit,  or  income  of  such  person. 

Sec.  14.  And  be  it  further  enacted,  That  every  incorpo- 
rated bank,  or  other  bank  legally  authorized  to  issue  notes 
as  circulation,  which  shall  neglect  or  omit  to  make  divi- 
dends or  additions  to  its  surplus  or  contingent  funds  as 
often  as  once  in  six  months,  shall,  in  heu  thereof,  make 
returns,  under  oath,  to  the  Commissioner  of  Internal 
Revenue  on  the  first  days  of  January  and  July  in  each 
year,  or  within  thirty  days  thereafter,  of  the  amount  of 
profits  which  have  accrued  or  been  earned  and  received  by 
said  bank  during  the  six  months  next  preceding  said 
first  days  of  January  and  July;  and  at  the  time  of  making 
such  returns,  shall  pay  to  the  Commissioner  of  Internal 
Revenue  a  duty  of  three  per  cent.,  on  such  profits,  and 
shall  be  subject  to  the  provisions  of  the  eighty-second  sec- 
tion of  the  act  to  which  this  is  an  addition :  Provided,  that 
the  return  for  the  first  of  January,  eighteen  hundred  and 
sixty-three,  shall  be  made  within  thirty  days  after  the 
passage  of  this  act. 


ACT  OF  JUNE  30,  1864.» 

Chapter  CLXXIII. — An  Act  To  Provide  Internal  Revenue 
to  Support  the  Government,  to  Pay  Interest  on  the  Public 
Debt,  and  for  other  Purposes. 

(Sections  11, 12,  13, 14, 15,  16,  18,  19,  20,  28,  29,  30,  31, 
32,  37,  38,  42,  45,  49  are  omitted  as  being  substantially  the 
same  as  the  provisions  of  the  Revised  Statutes  contained 
in  Chap.  V,  pp.  120-168  supra). 

Sections  98  and  100  are  omitted  as  not  directly  in  point, 
but  may  be  found  interesting  for  purposes  of  comparison. 

Brokers 

Sec.  99.  And  be  it  further  enacted,  That  all  brokers, 
and  bankers  doing  business  as  brokers,  shall  be  subject 
to  pay  the  following  duties  and  rates  of  duty  upon  the 
sales  of  merchandise,  produce,  gold  and  silver  bullion, 
foreign  exchange,  uncurrent  money,  promissory  notes, 
stocks,  bonds,  or  other  securities,  as  hereinafter  mentioned, 
and  shall  be  subject  to  all  the  provisions,  where  not  in- 
applicable thereto,  for  the  returns,  assessment,  collection 
of  the  duties,  and  liens  and  penalties  as  are  prescribed  for 
the  persons,  firms,  companies,  or  corporations,  owning  or 
possessing,  or  having  the  management  of  railroads, 
steamboats,  and  ferry-boats,  that  is  to  say :  Upon  all  sales 
of  merchandise,  produce,  or  other  goods,  one  eighth  of 
one  per  centum;  upon  all  sales  and  contracts  for  sales  of 
stocks  and  bonds,  one  twentieth  of  one  per  centum  on 
the  par  value  thereof;  and  of  gold  and  silver  bullion  and 
coin,  foreign  exchange,  promissory  notes,  or  other  securi- 

1 13  U.  S.  Stat,  at  Large,  223. 
194 


FEDERAL  INCOME  TAX  ACTS  195 

ties,  one  twentieth  of  one  per  centum  on  the  amount  of 
such  sales,  and  of  all  contracts  for  such  sales:  Provided, 
That  any  person,  firm,  or  company,  not  being  Ucensed  as  a 
broker,  or  banker,  or  wholesale  or  retail  dealer,  who  shall 
sell,  or  offer  to  sell,  any  merchandise,  produce,  or  gold  and 
silver  bullion,  foreign  exchange,  uncurrent  money,  prom- 
issory notes,  stocks,  bonds,  or  other  securities,  not  bona 
fide  at  the  time  his  own  property,  and  actually  on  hand, 
shall  be  liable,  in  addition  to  all  other  penalties  provided 
in  such  cases,  to  pay  fifty  per  centum  in  addition  to  the 
foregoing  duties  and  rates  of  duty. 


Railroads,  Steam-boats,  Ferry-boats,  and  Bridges 

Sec.  103.  And  be  it  further  enacted,  That  every  person, 
firm,  company,  or  corporation,  owning  or  possessing, 
or  having  the  care  or  management  of,  any  railroad,  canal, 
steamboat,  ship,  barge,  canal-boat,  or  other  vessel,  or  any 
stage-coach  or  other  vehicle  engaged  or  employed  in  the 
business  of  transporting  passengers  or  property  for  hire; 
or  in  transporting  the  mails  of  the  United  States,  or  any 
canal,  the  water  of  which  is  used  for  mining  purposes,  shall 
be  subject  to  and  pay  a  duty  of  two  and  one-half  per  cen- 
tum upon  the  gross  receipts  of  such  railroad,  canal,  steam- 
boat, ship,  barge,  canal-boat,  or  other  vessel,  or  such  stage- 
coach or  other  vehicle:  Provided,  That  the  duty  hereby 
imposed  shall  not  be  charged  upon  receipts  for  the  trans- 
portation of  persons  or  property,  or  mails,  between  the 
United  States  and  any  foreign  port;  and  any  person  or  per- 
sons, firms,  companies,  or  corporations,  owning,  possess- 
ing, or  having  the  care  or  management  of  any  toll-road, 
ferry,  or  bridge,  authorized  by  law  to  receive  toll  for  the 
transit  of  passengers,  beasts,  carriages,  teams  and  freight 
of  any  description, 'over  such  toll-road,  ferry,  or  bridge, 
shall  be  subject  to  and  pay  a  duty  of  three  per  centum  on 
the  gross  amount  of  all  their  receipts  of  every  description. 


196  APPENDIX  [Act,  June  30,  1864 

But  when  the  gross  receipts  of  any  such  bridge  or  toll- 
road  shall  not  exceed  the  amount  necessarily  expended  to 
keep  such  bridge  or  road  in  repair,  no  tax  shall  be  imposed 
on  such  receipts:  Provided,  That  all  such  persons,  com- 
panies, and  corporations  shall  have  the  right  to  add  the 
duty  or  tax  imposed  hereby  to  their  rates  of  fare  whenever 
their  liability  thereto  may  commence,  any  limitations 
which  may  exist  by  law  or  by  agreement  with  any  person 
or  company  which  may  have  paid  or  be  hable  to  pay  such 
fare  to  the  contrary  notwithstanding. 

Sec.  104.  And  be  it  further  enacted,  That  any  person, 
firm,  company,  or  corporation  carrying  on  or  doing  an 
express  business,  shall  be  subject  to  and  pay  a  duty  of 
three  per  centum  on  the  gross  amoimt  of  all  the  receipts 
of  such  express  business. 

Sec.  105.  And  be  it  further  enacted,  That  there  shall  be 
levied,  collected,  and  paid  a  duty  of  one  and  one  half  of  one 
per  centum  upon  the  gross  receipts  of  premiums,  or  assess- 
ments for  insurance  from  loss  or  damage  by  fire  or  by  the 
perils  of  the  sea,  made  by  every  insurance  company, 
whether  inland  or  marine  or  fire  insurance  company, 
and  by  every  association  or  individual  engaged  in  the  busi- 
ness of  insurance  against  loss  or  damage  by  fire  or  by  the 
perils  of  the  sea;  and  by  every  person,  firm,  company,  or 
corporation,  who  shall  issue  tickets,  or  contracts  of  insur- 
ance against  injury  to  persons  while  travelling  by  land  or 
water;  and  a  like  duty  shall  be  paid  by  the  agent  of  any 
foreign  insurance  company  having  an  office  or  doing  busi- 
ness within  the  United  States:  and  that  in  the  account  or 
return  to  be  rendered,  they  shall  state  the  amount  insured, 
renewed,  or  continued,  the  gross  amount  of  premiums 
received  and  assessments  collected,  and  the  duties  by  law 
accruing  thereon  for  the  quarter  then  next  preceding. 


FEDERAL  INCOME  TAX  ACTS  197 

Sec.  107.  And  be  it  further  enacted.  That  any  person, 
firm,  company,  or  corporation  owning  or  possessing  or 
having  the  care  or  management  of  any  telegraphic  Hne  by 
which  telegraphic  despatches  or  messages  are  received  or 
transmitted,  shall  be  subject  to,  and  pay  a  duty  of,  five 
per  centum  on  the  gross  amount  of  all  receipts  of  such 
person,  firm,  company,  or  corporation. 

Sec.  108.  And  he  it  further  enacted,  That  any  person, 
firm,  or  corporation,  or  the  manager  or  agent  thereof, 
owning,  conducting,  or  having  the  care  or  management 
of  any  theatre,  opera,  circus,  museum,  or  other  public 
exhibition  of  dramatic  or  operatic  representations,  plays, 
performances,  musical  entertainments,  feats  of  horseman- 
ship, acrobatic  sports,  or  other  shows  which  are  opened 
to  the  public  for  pay,  but  not  including  occasional  concerts, 
school  exhibitions,  lectures,  or  exhibitions  of  works  of  art, 
shall  be  subject  to  and  pay  a  duty  of  two  per  centum  on 
the  gross  amount  of  all  receipts  derived  by  such  person, 
firm,  company,  or  corporation  from  such  representations, 
plays,  performances,  exhibitions,  shows,  or  musical  enter- 
tainments. 

Sec.  109.  And  be  it  further  enacted,  That  any  person, 
firm,  company,  or  corporation,  owning  or  possessing,  or 
having  the  care  or  management  of,  any  railroad,  canal, 
steamboat,  ship,  barge,  canal-boat,  or  other  vessel,  or  any 
ferry,  toll-road  or  bridge,  as  enumerated  and  described  in 
section  one  hundred  and  two  [three]  of  this  act;  or  carrying 
on  or  doing  an  express  business;  or  engaged  in  the  business 
of  insurance,  as  hereinbefore  described;  or  owning  or  hav- 
ing the  care  and  management  of  any  telegraph  line,  or 
owning,  possessing,  leasing,  or  having  the  control  or  man- 
agement of  any  circus,  theatre,  opera,  or  museum,  shall 
within  twenty  days  after  the  end  of  each  and  every  month, 
make  a  list  or  return  in  duplicate  to  the  assistant  assessor 
of  the  district,  stating  the  gross  amount  of  their  receipts, 


19S  APPENDIX  [Act,  June  30,  1864 

respectively,  for  the  month  next  preceding,  which  return 
shall  be  verified  by  the  oath  or  affirmation  of  such  owner, 
possessor,  manager,  agent,  or  other  proper  officer,  in  the 
manner  and  form  to  be  prescribed  from  time  to  time 
by  the  Commissioner  of  Internal  Revenue;  and  shall 
also  pay  to  the  collector  the  full  amount  of  duties  which 
have  accrued  on  such  receipts  for  the  month  aforesaid. 
And  in  case  of  neglect  or  refusal  to  make  said  lists  or  return 
for  the  space  of  ten  days  after  such  return  should  have 
been  made  as  aforesaid,  the  assessor  or  assistant  assessor 
shall  proceed  to  estimate  the  amount  received  and  the 
duties  payable  thereon,  and  shall  add  thereto  ten  per  cen- 
tum, as  hereinbefore  provided  in  other  cases  of  delinquency, 
to  make  return  for  purposes  of  assessment;  and  for  the 
purpose  of  making  such  assessment,  or  of  ascertaining 
the  correctness  of  any  such  return,  the  books  of  any  such 
person,  firm,  company,  or  corporation  shall  be  subject  to 
the  inspection  of  the  assessor  or  assistant  assessor  on  his 
demand  or  request  therefor.  And  in  case  of  neglect  or 
refusal  to  pay  the  duties,  with  the  addition  aforesaid, 
when  the  same  have  been  ascertained,  for  the  space  of 
ten  days  after  the  same  shall  have  become  payable,  the 
owner,  possessor,  or  person  having  the  management  as 
aforesaid,  shall  pay,  in  addition,  ten  per  centum  on  the 
amount  of  such  duties  and  addition ;  and  for  any  attempt 
knowingly  to  evade  the  payment  of  such  duties,  the  said 
owner,  possessor,  or  person  having  the  care  or  manage- 
ment as  aforesaid,  shall  be  liable  to  pay  a  penalty  of  one 
thousand  dollars  for  every  such  attempt,  to  be  recovered 
as  provided  in  this  act  for  the  recovery  of  penalties.  And 
all  provisions  of  this  act  in  relation  to  liens  and  collections 
by  distraint,  not  incompatible  herewith,  shall  apply  to 
this  section  and  the  objects  therein  embraced. 

Sec.  110.  And  he  it  further  enacted,  That  there  shall  be 
levied,  collected,  and  paid  a  duty  of  one  twenty-fourth 
of  one  per  centum  each  month  upon  the  average  amount 


FEDERAL  INCOME  TAX  ACTS  199 

of  the  deposits  of  money,  subject  to  pajonent  by  check 
or  draft,  or  represented  by  certificates  of  deposit  or  other- 
wise, whether  payable  on  demand  or  at  some  future  day, 
with  any  person,  bank,  association,  company,  or  corpora- 
tion engaged  in  the  business  of  banking;  and  a  duty  of 
one  twenty-fourth  of  one  per  centum  each  month  as 
aforesaid,  upon  the  average  amount  of  the  capital  of  any 
bank,  association,  company,  or  corporation,  or  person 
engaged  in  the  business  of  banking  beyond  the  amount 
invested  in  United  States  bonds;  and  a  duty  of  one  twelfth 
of  one  per  centum  each  month  upon  the  average  amount 
of  circulation  issued  by  any  bank,  association,  corporation, 
company,  or  person,  including  as  circulation  all  certified 
checks  and  all  notes  and  other  obligations  calculated  or 
intended  to  circulate  or  to  be  used  as  money,  but  not  in- 
cluding that  in  the  vault  of  the  bank,  or  redeemed  and  on 
deposit  for  said  bank;  and  an  additional  duty  of  one  sixth 
of  one  per  centum,  each  month,  upon  the  average  amount 
of  such  circulation,  issued  as  aforesaid  beyond  the  amount 
of  ninety  per  centum  of  the  capital  of  any  such  bank,  asso- 
ciation, corporation,  company,  or  person,  and  upon  any 
amount  of  such  circulation,  beyond  the  average  amount 
of  the  circulation  that  had  been  issued  as  aforesaid  by 
any  such  bank,  association,  corporation,  company,  or 
person,  for  the  six  months  preceding  the  first  day  of  July, 
eighteen  hundred  and  sixty-four.  And  on  the  first  Mon- 
day of  August  next,  and  of  each  month  thereafter,  a 
true  and  accurate  return  of  the  amount  of  circulation,  of 
deposit,  and  of  capital  as  aforesaid,  for  the  previous 
month,  shall  be  made  and  rendered  in  duplicate  by  each 
of  such  banks,  associations,  corporations,  companies,  or 
persons  to  the  assessor  of  the  district  in  which  any  such 
bank,  association,  corporation,  or  company  may  be 
located,  or  in  which  such  person  may  reside,  with  a  de- 
claration annexed  thereto,  and  the  oath  or  affirmation 
of  such  person,  or  of  the  president  or  cashier  of  such  bank, 
association,  corporation,  or  company,  in  such  form  and 


200  APPENDIX  [Act,  June  30,  1864 

manner  as  may  be  prescribed  by  the  Conamissioner  of 
Internal  Revenue,  that  the  same  contains  a  true  and  faith- 
ful statement  of  the  amount  of  circulation,  deposits,  and 
capital  as  aforesaid,  subject  to  duty  as  aforesaid,  and  shall 
transmit  the  duplicate  of  said  return  to  the  Commissioner 
of  Internal  Revenue,  and  within  twenty  days  thereafter 
shall  pay  to  the  said  Commissioner  of  Internal  Revenue 
the  duties  hereinbefore  prescribed  upon  the  said  amount 
of  circulation,  of  deposits,  and  of  capital,  as  aforesaid, 
and  for  any  refusal  or  neglect  to  make  or  to  render  such 
return  and  payment  as  aforesaid,  any  such  bank,  associa- 
tion, corporation, .  company,  or  person  so  in  default  shall 
be  subject  to  and  pay  a  penalty  of  two  hundred  dollars, 
besides  the  additional  penalty  and  forfeitures  in  other 
cases  provided  in  this  act;  and  the  amount  of  circulation, 
deposit,  and  capital,  as  aforesaid,  in  default  of  the  proper 
return,  shall  be  estimated  by  the  assessor  or  assistant 
assessor  of  the  district  as  aforesaid,  upon  the  best  informa- 
tion he  can  obtain;  and  every  such  penalty,  together  with 
the  duties  as  aforesaid,  may  be  recovered  for  the  use  of 
the  United  States  in  any  court  of  competent  jurisdiction. 
And  in  the  case  of  banks  with  branches,  the  duty  herein 
provided  for  shall  be  imposed  upon  the  circulation  of 
each  branch,  severally,  and  the  amount  of  capital  of  each 
branch  shall  be  considered  to  be  the  amount  allotted  to 
such  branch;  and  so  much  of  an  act  entitled  "An  act 
to  provide  ways  and  means  for  the  support  of  the  govern- 
ment," approved  March  three,  eighteen  hundred  and 
sixty-three,  as  imposes  any  tax  on  banks,  their  circulation, 
capital,  or  deposits,  other  than  is  herein  provided,  is 
hereby  repealed :  Provided,  That  this  section  shall  not  apply 
to  associations  which  are  taxed  under  and  by  virtue  of 
the  act  ''to  provide  a  national  currency,  secured  by  a 
pledge  of  United  States  bonds,  and  to  provide  for  the 
circulation  and  redemption  thereof;"  nor  to  any  savings 
bank  having  no  capital  stock,  and  whose  business  is  con- 
fined to  receiving  deposits  and  loaning  the  same  on  in- 


FEDERAL  INCOME  TAX  ACTS  201 

terest  for  the  benefit  of  the  depositors  only,  and  which 
do  no  other  business  of  banking:  And  provided,  further, 
That  any  bank  ceasing  to  issue  notes  for  circulation,  and 
which  shall  deposit  in  the  Treasury  of  the  United  States, 
in  lawful  money,  the  amount  of  its  outstanding  circulation, 
to  be  redeemed  at  par,  under  such  regulations  as  the 
Secretary  of  the  Treasury  may  prescribe,  shall  be  exempt 
from  any  tax  upon  such  circulation. 

Sec.  111.  And  he  it  further  enacted,  That  every  individ- 
ual partnership,  firm,  and  association,  being  proprietors, 
managers,  or  agents  of  lotteries,  shall  pay  a  tax  of  five 
per  centum  on  the  gross  amount  of  the  receipts  from  the 
said  business;  and  all  persons  making  such  sales  shall, 
within  ten  days  after  the  first  day  of  each  and  every 
month,  make  and  render  a  list  or  return  in  duplicate  to 
the  assistant  assessor  of  the  gross  amount  of  such  sales, 
made  as  aforesaid,  with  the  amount  of  duty  which  has 
accrued  or  should  accrue  thereon;  which  list  shall  have 
annexed  thereto  a  declaration  under  oath  or  affirmation, 
in  such  form  and  signed  by  such  officer,  agent,  or  clerk, 
as  may  be  prescribed  by  the  Commissioner  of  Internal 
Revenue,  that  the  same  is  true  and  correct,  and  that  the 
said  proprietors,  managers,  and  agents  shall  on  or  before 
the  twentieth  day  of  each  and  every  month,  as  aforesaid, 
pay  the  collector  or  deputy  collector  of  the  proper  dis- 
trict the  amount  of  the  duty  or  tax  as  aforesaid.  And  in 
default  of  making  such  lists  or  returns,  the  said  proprietors, 
managers,  and  agents,  and  all  other  persons  making  such 
sales,  shall  be  subject  to  and  pay  a  penalty  of  one  thousand 
dollars,  besides  the  additions,  penalties,  and  forfeitures  in 
other  cases  provided;  and  the  said  proprietors,  managers, 
and  agents  shall,  in  default  of  paying  the  said  duty  or 
tax  at  the  time  herein  required,  be  subject  to  and  pay  a 
penalty  of  one  thousand  dollars,  or  be  imprisoned  not  ex- 
ceeding one  year.  In  all  cases  of  delinquency  in  making 
said  list,  return,  or  payment,  the  assessments  and  collec- 


202  APPENDIX  [Act,  June  30,  1864 

tions  shall  be  made  in  the  manner  prescribed  in  the  pro- 
\'isions  of  this  act  in  relation  to  manufactures,  articles, 
and  products:  Provided,  That  the  managers  of  any  sani- 
tary fair,  or  of  any  charitable,  benevolent,  or  religious 
association,  may  apply  to  the  collector  of  the  district 
and  present  to  him  proof  that  the  proceeds  of  any  contem- 
plated lottery,  raffle,  or  gift  enterprise  will  be  applied  to 
the  relief  of  sick  and  wounded  soldiers,  or  to  some  other 
charitable  use,  and  thereupon  the  commissioner,  shall 
grant  a  permit  to  hold  such  lottery,  raffle,  or  gift  enter- 
prise, and  the  said  sanitary  fair,  or  charitable  or  benevo- 
lent association,  shall  be  exempt  from  all  charge,  whether 
from  tax  or  hcense,  in  respect  of  such  lottery,  raffle,  or 
gift  enterprise:  Provided,  further,  That  nothing  in  this 
section  contained  shall  be  construed  to  legalize  any  lot- 
tery. 


Sec.  114.  And  he  it  further  enacted.  That  there  shall  be 
levied,  collected,  and  paid  by  any  person  or  persons,  firm, 
or  company,  publishing  any  newspaper,  magazine,  review, 
or  other  literary,  scientific,  or  news  publication,  issued 
periodically,  on  the  gross  receipts  for  all  advertisements, 
or  all  matters  for  the  insertion  of  which  in  said  news- 
papers or  other  publication,  as  aforesaid,  or  in  extras, 
supplements,  sheets,  or  fly-leaves,  accompanying  the  same, 
pay  is  required  or  received,  a  duty  of  three  per  centum; 
and  the  person  or  persons,  firm,  or  company,  owning, 
possessing,  or  having  the  care  or  management  of  any  and 
every  such  newspaper,  or  other  publication,  as  aforesaid, 
shall  make  a  hst  or  return  on  the  first  day  of  January, 
April,  July,  and  October  of  each  year,  containing  the 
gross  amount  of  receipts  as  aforesaid,  and  the  amount 
of  duties  which  have  accrued  thereon,  and  render  the 
same  in  duplicate  to  the  assistant  assessor  of  the  district 
where  such  newspaper,  magazine,  review,  or  other  literary 
or  news  publication  is  or  may  be  published;  which  )ist 


FEDERAL  INCOME  TAX  ACTS  203 

or  return  shall  have  annexed  a  declaration,  under  oath 
or  affirmation,  to  be  made  according  to  the  manner  and 
form  which  may  be  from  time  to  time  prescribed  by  the 
Commissioner  of  Internal  Revenue,  of  the  owner,  pos- 
sessor, or  person  having  the  care  or  management  of  such 
newspaper,  magazine,  review,  or  other  pubUcation,  as 
aforesaid,  that  the  same  is  true  and  correct;  and  shall  also, 
quarterly,  within  ten  days  after  the  time  of  making  said 
list  or  return,  pay  to  the  collector  or  deputy  collector  of 
the  district  the  full  amount  of  said  duties.  And  in  case 
of  neglect  or  refusal  to  comply  with  any  of  the  provisions 
contained  in  this  section,  or  to  make  and  render  said 
list  or  return,  for  the  space  of  ten  days  after  the  time  when 
said  list  or  return  ought  to  have  been  made,  as  aforesaid, 
the  assistant  assessors  of  the  respective  districts  shall  pro- 
ceed to  estimate  the  duties  as  heretofore  provided  in  other 
cases  of  delinquency;  and  in  case  of  neglect  or  refusal  to 
pay  the  duties,  as  aforesaid,  for  the  space  of  ten  days 
after  said  duties  become  due  and  payable,  and  have  been 
demanded,  said  owner,  possessor,  or  person  or  persons 
having  the  care  or  management  of  said  newspapers  or 
publications,  as  aforesaid,  shall  pay,  in  addition  thereto, 
a  penalty  of  ten  per  centum  on  the  amount  due.  And  in 
case  of  fraud  or  evasion,  whereby  the  revenue  is  attempted 
to  be  defrauded,  or  the  duty  withheld,  said  owners,  pos- 
sessors, or  person  or  persons  having  the  care  or  manage- 
ment of  said  newspapers  or  other  publications,  as  afore- 
said, shall  forfeit  and  pay  a  penalty  of  one  thousand 
dollars  for  each  offence,  or  for  any  sum  fraudulently  un- 
accounted for.  And  all  provisions  in  this  act  in  relation 
to  returns,  additions,  penalties,  forfeitures,  liens,  assess- 
ments, and  collection,  not  incompatible  herewith,  shall 
apply  to  this  section  and  the  objects  herein  embraced: 
Provided,  That  in  all  cases  where  the  rate  or  price  of  ad- 
vertising is  fixed  by  any  law  of  the  United  States,  state, 
or  territory,  it  shall  be  lawful  for  the  company,  person  or 
persons,  publishing  said  advertisements,  to  add  the  duty 


204  .  APPENDIX  [Act,  June  30,  1864 

or  tax  imposed  by  this  act  to  the  price  of  said  advertise- 
ments, any  law  to  the  contrary  notwithstanding;  and  that 
the  receipts  for  advertisements  to  the  amount  of  six 
hundred  dollars  annually,  by  any  person  or  persons,  firm, 
or  company  publishing  any  newspaper,  magazine,  review, 
or  other  literary,  scientific,  or  news  publication,  issued 
periodically,  shall  be  exempt  from  duty:  And  provided, 
further,  That  all  newspapers  whose  average  circulation 
does  not  exceed  two  thousand  copies  shall  be  exempted 
from  all  taxes  for  advertisements. 


Sec.  116.  And  he  it  further  enacted,  That  there  shall  be 
levied,  collected,  and  paid  annually  upon  the  annual 
gains,  profits,  or  income  of  every  person  residing  in  the 
United  States,  or  of  any  citizen  of  the  United  States  resid- 
ing abroad,  whether  derived  from  any  kind  of  property, 
rents,  interests,  dividends,  salaries,  or  from  any  pro- 
fession, trade,  employment,  or  vocation,  carried  on  in 
the  United  States,  or  elsewhere,  or  from  any  other  source 
whatever,  except  as  hereinafter  mentioned,  if  such  annual 
gains,  profits,  or  income  exceed  the  sum  of  six  hundred 
dollars,  a  duty  of  five  per  centum  on  the  excess  over  six 
hundred  dollars  and  not  exceeding  five  thousand  dollars; 
and  a  duty  of  seven  and  one-half  of  one  per  centum  per 
annum  on  the  excess  over  five  thousand  dollars  and  not 
exceeding  ten  thousand  dollars;  and  a  duty  of  ten  per 
centum  on  the  excess  over  ten  thousand  dollars.  And 
the  duty  herein  provided  for  shall  be  assessed,  collected, 
and  paid  upon  the  gains,  profits,  or  income  for  the  year 
ending  the  thirty-first  day  of  December  next,  preceding 
the  time  for  levying,  collecting,  and  paying  said  duty: 
Provided,  That  income  derived  from  interest  upon  notes, 
bonds,  and  other  securities  of  the  United  States,  shall  be 
included  in  estimating  incomes  under  this  section:  Pro- 
vided, That  only  one  deduction  of  six  hundred  dollars  shall 
be  made  from  the  aggregate  incomes  of  all  the  members  of 


FEDERAL  INCOME  TAX  ACTS  205 

any  family  composed  of  parents  and  minor  children, 
or  husband  and  wife,  except  in  cases  where  such  separate 
income  shall  be  derived  from  the  separate  and  individual 
estates,  gains,  or  labor  of  the  wife  or  child:  And  provided 
further,  That  net  profits  realized  by  sales  of  real  estate 
purchased  within  the  year,  for  which  income  is  estimated, 
shall  be  chargeable  as  income;  and  losses  on  sales  of  real 
estate  purchased  within  the  year,  for  which  income  is 
estimated,  shall  be  deducted  from  the  income  of  such  year. 

Sec.  117.  And  be  it  further  enacted,  That  in  estimating 
the  annual  gains,  profits,  or  income  of  any  person,  all 
national,  state,  and  municipal  taxes,  other  than  the 
national  income  tax,  lawfully  assessed  within  the  year 
upon  the  property  or  sources  of  income  of  any  person, 
as  aforesaid,  from  which  said  annual  gains,  profits,  or 
income  is  or  should  be  derived,  shall  be  deducted,  in  addi- 
tion to  six  hundred  dollars,  from  the  gains,  profits,  or  in- 
come of  the  person  who  has  actually  paid  the  same, 
whether  owner,  tenant,  or  mortgagor;  also  the  salary 
or  pay  received  for  services  in  the  civil,  military,  naval, 
or  other  service  of  the  United  States,"  including  senators, 
representatives,  and  delegates  in  congress,  above  the  rate 
of  six  hundred  dollars  per  annum;  and  there  shall  also  be 
deducted  the  income  derived  from  dividends  on  shares  in 
the  capital  stock  of  any  bank,  trust  company,'  savings 
institution,  insurance,  railroad,  canal,  turnpike,  canal 
navigation,  or  slack-water  company,  and  the  interest 
on  any  bonds,  or  other  evidences  of  indebtedness  of  any 
such  corporation,  or  company,  which  shall  have  been 
assessed  and  the  tax  paid,  as  hereinafter  provided;  also 
the  amount  paid  by  any  person  for  the  rent  of  the  home- 
stead used  or  occupied  by  himself  or  his  family,  and  the 
rental  value  of  any  homestead  used  or  occupied  by  any 
person,  or  by  his  family,  in  his  own  right,  or  in  the  right 
of  his  wife,  shall  not  be  included  and  assessed  as  part  of 
the  income  of  such  person.    In  estimating  the  annual  gains, 


206  APPENDIX  [Act,  June  30,  1864 

profits,  or  income  of  any  person,  the  interest  over  and 
above  the  amount  of  interest  paid  upon  all  notes,  bonds, 
and  mortgages,  or  other  forms  of  indebtedness,  bearing  in- 
terest, whether  due  and  paid  or  not,  if  good  and  collect- 
ible, shall  be  included  and  assessed  as  part  of  the  income 
of  such  person  for  each  year;  and  also  all  income  or  gains 
derived  from  the  purchase  and  sale  of  stocks  or  other 
property,  real  or  personal,  and  the  increased  value  of 
live  stock,  whether  sold  or  on  hand,  and  the  amount  of 
sugar,  wool,  butter,  cheese,  pork,  beef,  mutton,  or  other 
meats,  hay  and  grain,  or  other  vegetable,  or  other  produc- 
tions of  the  estate  of  such  person  sold,  not  including  any 
part  thereof  unsold  or  on  hand  during  the  year  next  pre- 
ceding the  thirty-first  of  December,  shall  be  included  and 
assessed  as  part  of  the  income  of  such  person  for  each 
year,  and  the  gains  and  profits  of  all  companies,  whether 
incorporated  or  partnership,  other  than  the  companies 
specified  in  this  section,  shall  be  included  in  estimating 
the  annual  gains,  profits,  or  income  of  any  person  entitled 
to  the  same,  whether  divided  or  otherwise.  In  estimating 
deductions  from  income,  as  aforesaid,  when  any  person 
rents  buildings,  lands,  or  other  property,  or  hires  labor 
to  carry  on  land,  or  to  conduct  any  other  business  from 
which  suc]^  income  is  actually  derived,  or  pays  interest 
upon  any  actual  incumbrance  thereon,  the  amount  actually 
paid  for  such  rent,  labor,  or  interest  shall  be  deducted; 
and  also  the  amount  paid  out  for  usual  or  ordinary  re- 
pairs, not  exceeding  the  average  paid  out  for  such  purposes 
for  the  preceding  five  years,  shall  be  deducted,  but  no  de- 
duction shall  be  made  for  any  amount  paid  out  for  new 
buildings,  permanent  improvements,  or  betterments,  made 
to  increase  the  value  of  any  property  or  estate:  Provided, 
That  in  cases  where  the  salary  or  other  compensation 
paid  to  any  person  in  the  employment  or  service  of  the 
United  States  shall  not  exceed  the  rate  of  six  hundred 
dollars  per  annum,  or  shall  be  by  fees,  or  uncertain  or 
irregular  in  the  amount  or  in  the  time  during  which  the 


FEDERAL  INCOME  TAX  ACTS  207 

same  shall  have  accrued  or  been  earned,  such  salary  or 
other  compensation  shall  be  included  in  estimating  the 
annual  gains,  profits,  or  income  of  the  person  to  whom  the 
same  shall  have  been  paid,  in  such  manner  as  the  commis- 
sioner of  internal  revenue,  under  the  directions  of  the 
Secretary  of  the  Treasury,  may  prescribe. 

Sec.  118.  And  be  it  further  enacted,  That  it  shall  be  the 
duty  of  all  persons  of  lawful  age,  and  all  guardians  and 
trustees,  whether  such  trustees  are  so  by  virtue  of  their 
office  as  executors,  administrators,  or  in  other  fiduciary 
capacity,  to  make  a  list  or  return  under  oath  or  affirmation, 
in  such  form  and  manner  as  may  be  prescribed  by  the 
conomissioner  of  internal  revenue,  to  the  assistant  assessor 
of  the  district  in  which  he  resides,  of  the  amount  of  his 
or  her  income,  or  the  income  of  such  minors  or  persons  as 
may  be  held  in  trust  as  aforesaid,  according  to  the  require- 
ments hereinbefore  mentioned,  stating  the  sources  from 
which  said  income  is  derived,  whether  from  any  kind  of 
property,  or  the  purchase  and  sale  of  property,  rents, 
interest,  dividends,  salaries,  or  from  any  profession,  trade, 
employment,  or  vocation,  or  otherwise.  And  in  case 
of  neglect  or  refusal  to  make  such  return,  the  assessor  or 
assistant  assessor  shall  assess  the  amount  of  his  or  her 
income,  and  the  duty  thereon,  in  the  same  manner  as  is 
provided  for  in  other  cases  of  neglect  and  refusal  to  fur- 
nish lists  or  returns  in  the  provisions  of  this  act,  where  not 
otherwise  incompatible;  and  the  assistant  assessor  may 
increase  the  amount  of  the  list  or  return,  or  of  any  party 
making  such  return,  if  he  shall  be  satisfied  that  the  same 
is  understated :  Provided,  That  any  party  in  his  or  her  own 
behalf,  or  as  guardian  or  trustee,  as  aforesaid,  shall  be 
permitted  to  declare,  under  oath  or  affirmation,  the  form 
and  manner  of  which  shall  be  prescribed  by  the  commis- 
sioner of  internal  revenue,  that  he  or  she  was  not  possessed 
of  an  income  of  six  hundred  dollars,  liable  to  be  assessed  ac- 
cording to  the  provisions  of  this  act,  or  may  declare  that  he 


208  APPENDIX  [Act,  June  30,  1864 

or  she  has  been  assessed  elsewhere  in  the  same  year  for,  and 
has  paid  an  income  duty  under  authority  of  the  United 
States,  and  shall  thereupon  be  exempt  from  income  duty  in 
said  district;  or,  if  the  Ust  or  return  of  any  party  shall  have 
been  increased  by  the  assistant  assessor,  in  manner  as  afore- 
said, such  party  may  be  permitted  to  declare,  under  oath  or 
affirmation,  the  amount  of  annual  income,  or  the  amount 
held  in  trust,  as  aforesaid,  liable  to  be  assessed,  and  the 
same,  so  declared,  shall  be  received  by  such  assistant 
assessor  as  true,  and  as  the  sum  upon  which  duties  are  to 
be  assessed  and  collected,  except  that  the  deductions 
claimed  in  such  cases  shall  not  be  made  or  allowed  until 
approved  by  the  assistant  assessor.  But  any  person  feel- 
ing aggrieved  by  the  decision  of  the  assistant  assessor  in 
such  cases  may  appeal  to  the  assessor  of  the  district,  and 
his  decision  thereon  shall  be  final;  and  the  form,  time,  and 
manner  of  proceedings  shall  be  subject  to  rules  and  regula- 
tions to  be  prescribed  by  the  cominiissioner  of  internal 
revenue. 

Sec.  119.  And  be  it  further  enacted,  That  the  duties  on 
incomes  herein  iijiposed  shall  be  levied  on  the  first  day  of 
May,  and  be  due  and  payable  on  or  before  the  thirtieth 
day  of  June,  in  each  year,  until  and  including  the  year 
eighteen  hundred  and  seventy,  and  no  longer;  and  to  any 
sum  or  sums  annually  due  and  unpaid  for  thirty  days  after 
the  thirtieth  of  June,  as  aforesaid,  and  for  ten  days  after 
demand  thereof  by  the  collector,  there  shall  be  levied 
in  addition  thereto  the  simi  of  ten  per  centum  on  the 
amount  of  duties  unpaid,  as  a  penalty,  except  from  the 
estate  of  deceased  and  insolvent  persons.  And  if  any  per- 
son liable  to  pay  such  duty  shall  neglect  or  refuse  to  pay 
the  same  after  such  demand,  the  amount  due  shall  be  a 
lien  in  favor  of  the  United  States  from  the  time  it  was  due 
until  paid,  with  the  interest,  penalties,  and  costs  that  may 
accrue  in  addition  thereto,  upon  all  the  property  and  rights 
to  property  belonging  to  such  person;  and  in  default  of 


FEDERAL  INCOME  TAX  ACTS  209 

the  payment  of  said  duty  aforesaid,  said  lien  may  be  en- 
forced by  distraint  upon  such  property,  rights  to  property, 
stocks,  securities,  and  evidences  of  debt,  by  whomsoever 
holden;  and  for  this  purpose  the  collector,  after  demands 
duly  given,  as  aforesaid,  shall  issue  a  warrant,  in  form  and 
manner  to  be  prescribed  by  the  commissioner  of  internal 
revenue,  under  the  directions  of  the  Secretary  of  the 
Treasury,  and  by  virtue  of  such  warrant  there  may  be 
levied  on  such  property,  rights  to  property,  stocks,  securi- 
ties, and  evidences  of  debt,  a  further  sum,  to  be  fixed  and 
stated  in  such  warrant,  over  and  above  the  said  annual 
duty,  interest,  and  penalty  for  non-payment,  sufficient  for 
the  fees,  costs,  and  expenses  of  such  levy.  And  in  all  cases 
of  sale,  as  aforesaid,  the  certificate  of  such  sale  by  the 
collector  shall  vest  in  the  purchaser  all  right,  title  and 
interest  of  such  delinquent  in  and  to  such  property, 
whether  the  property  be  real  or  personal;  and  where  the 
subject  of  sale  shall  be  stocks,  the  certificate  of  said  sale 
shall  be  lawful  authority  and  notice  to  the  proper  corpora- 
tion, company,  or  association,  to  record  the  same  on  the 
books  or  records,  in  the  same  manner  as  if  transferred  or 
assigned  by  the  person  or  party  holding  the  same,  to  issue 
new  certificates,  of  stock  therefor  in  lieu  of  any  original  or 
prior  certificates,  which  shall  be  void  whether  cancelled  or 
not.  And  said  certificates  of  sale  of  the  collector,  where 
the  subject  of  sale  shall  be  securities  or  .other  evidences  of 
debt,  shall  be  good  and  valid  receipts  to  the  person  hold- 
ing the  same,  as  against  any  person  holding,  or  claim- 
ing to  hold,  possession  of  such  seciu-ities  or  other  evidences 
of  debt. 

Sec.  120.  And  be  it  further  enacted,  That  there  shall  be 
levied  and  collected  a  duty  of  five  per  centum  on  all  divi- 
dends in  scrip  or  money  thereafter  declared  due,  and  when- 
ever the  same  shall  be  payable,  to  stockholders,  policy- 
holders, or  depositors,  as  part  of  the  earnings,  income, 
or  gains,  of  any  bank,  trust  company,  savings  institution^ 


210  APPENDIX  [Act,  June  30,  1864 

and  of  any  fire,  marine,  life,  inland  insurance  company, 
either  stock  or  mutual,  under  whatever  name  or  style 
known  or  called  in  the  United  States  or  territories,  whether 
specially  incorporated  or  existing  under  general  laws,  and 
on  all  undistributed  sums,  or  sums  made  or  added  during 
the  year  to  their  surplus  or  contingent  funds;  and  said 
banks,  trust  companies,  savings  institutions,  and  insurance 
companies  shall  pay  the  said  duty,  and  are  hereby  author- 
ized to  deduct  and  withhold  from  all  payments  made  on  ac- 
count of  any  dividends  or  sums  of  money  that  may  be  due 
and  payable  as  aforesaid,  the  said  duty  of  five  per  centum. 
And  a  list  or  return  shall  be  made  and  rendered  to  the 
assessor  or  assistant  assessor  in  duplicate,  and  one  of  said 
lists  or  returns  shall  be  transmitted,  and  the  duty  paid  to 
the  commissioner  of  internal  revenue  within  thirty  days 
after  the  time  when  any  dividends  or  sums  of  money  be- 
come due  or  payable  as  aforesaid;  and  said  list  or  return 
shall  contain  a  true  and  faithful  account  of  the  amount  of 
duties  as  aforesaid;  and  there  shall  be  annexed  thereto  a 
declaration  of  the  president,  cashier,  or  treasurer  of  the 
bank,  ti*ust  company,  savings  institution,  or  insurance 
company,  under  oath  or  affirmation,  in  form  and  manner 
as  may  be  prescribed  by  the  commissioner  of  internal  rev- 
enue, that  the  same  contains  a  true  and  faithful  account  of 
the  duties  as  aforesaid.  And  for  any  default  in  the  making 
or  rendering  of  such  list  or  return,  with  such  declaration 
annexed,  the  bank,  trust  company,  savings  institution,  or 
insurance  company,  making  such  default,  shall  forfeit  as  a 
penalty  the  sum  of  one  thousand  dollars;  and  in  case  of  any 
default  in  making  or  rendering  said  list  or  return,  or  of  any 
default  in  the  payment  of  the  duty  as  required,  or  any  part 
thereof,  the  assessment  and  collection  of  the  duty  and 
penalty  shall  be  in  accordance  with  the  general  provi- 
sions of  law  in  other  cases  of  neglect  and  refusal:  Provided, 
That  the  duty  upon  the  dividends  of  life  insurance  com- 
panies shall  not  be  deemed  due  or  to  be  collected  until 
such  dividends  shall  be  payable  by  such  companies,  nor 


FEDERAL  INCOME  TAX  ACTS  211 

shall  the  portion  of  premiums  returned  by  mutual  life  in- 
surance companies  to  their  policy-holders  be  considered  as 
dividends  or  profits  imder  this  act. 

Sec.  121.  And  be  it  further  enacted,  That  any  bank  legally 
authorized  to  issue  notes  as  circulation,  which  shall  neg- 
lect or  omit  to  make  dividends  or  additions  to  its  surplus 
or  contingent  fund  as  often  as  once  in  six  months,  shall 
make  a  list  or  return  in  duplicate,  under  oath  or  affirma- 
tion of  the  president  or  cashier,  to  the  assessor  or  assis- 
tant assessor  of  the  district  in  which  it  is  located,  on  the 
first  day  of  January  and  July  in  each  year,  or  within  thirty 
days  thereafter,  of  the  amount  of  profits  which  have  ac- 
crued or  been  earned  and  received  by  said  bank  during 
the  six  months  next  preceding  said  first  days  of  January 
and  July;  and  shall  present  one  of  said  lists  or  returns  and 
pay  to  the  collector  of  the  district  a  duty  of  five  per  centum 
on  such  profits;  and  in  case  of  default  to  make  such  list  or 
return  and  payment  within  the  thirty  days  as  aforesaid, 
shall  be  subject  to  the  provisions  of  the  foregoing  section 
of  this  act:  Provided,  That  when  any  dividend  is  made 
which  includes  any  part  of  the  surplus  or  contingent  fund 
of  any  bank,  trust  company,  savings  institution,  insur- 
ance or  railroad  company,  which  has  been  assessed  and 
the  duty  paid  thereon,  the  amount  of  duty  so  paid  on  that 
portion  of  the  surplus  or  contingent  fimd  may  be  deducted 
from  the  duty  on  such  dividend. 

Sec.  122.  And  he  it  further  enacted,  That  any  railroad, 
canal,  turnpike,  canal  navigation,  or  slack-water  company 
indebted  for  any  money  for  which  bonds  or  other  evi- 
dences of  indebtedness  have  been  issued,  payable  in  one 
or  more  years  after  date,  upon  which  interest  is  stipulated 
to  be  paid,  or  coupons  representing  the  interest,  or  any 
such  company  that  may  have  declared  any  dividend  in 
scrip,  or  money  due  or  payable  to  its  stockholders,  as  part 
of  the  earnings,  profits,  income,  or  gains  of  such  company, 


212  APPEIiJDIX  [Act,  June  30,  1864 

and  all  profits  of  such  company  carried  to  the  account  of 
any  fund,  or  used  for  construction,  shall  be  subject  to  and 
pay  a  duty  of  five  per  centum  on  the  amount  of  all  such 
interest,  or  coupons,  dividends,  or  profits,  whenever  the 
same  shall  be  payable;  and  said  companies  are  hereby 
authorized  to  deduct  and  withhold  from  all  payments,  on 
account  of  any  interest,  or  coupons  and  dividends  due  and 
payable  as  aforesaid,  the  duty  of  five  per  centum;  and  the 
payment  of  the  amount  of  said  duty  so  deducted  from  the 
interest,  or  coupons,  or  dividends,  and  certified  by  the 
president  or  treasurer  of  said  company,  shall  discharge 
said  company  from  that  amount  of  the  dividend,  or  in- 
terest, or  coupon,  on  the  bonds  or  other  evidences  of  their 
indebtedness  so  held  by  any  person  or  party  whatever, 
except  where  said  companies  may  have  contracted  other- 
wise. And  a  list  or  return  shall  be  made  and  rendered  to 
the  assessor  or  assistant  assessor  in  duplicate,  and  one  of 
said  lists  or  returns  shall  be  transmitted  and  the  duty  paid 
to  the  commissioner  of  internal  revenue  within  thirty 
days  after  the  time  when  said  interest,  coupons,  or  divi- 
dends become  due  and  payable,  and  as  often  as  every  six 
months;  and  said  list  or  return  shall  contain  a  true  and 
faithful  account  of  the  amount  of  the  duty,  and  there  shall 
be  annexed  thereto  a  declaration  of  the  president  or  treas- 
urer of  the  company,  under  oath  or  affirmation,  in  form 
and  manner  as  may  be  prescribed  by  the  conomissioner 
of  internal  revenue,  that  the  same  contains  a  true  and 
faithful  account  of  said  duty.  And  for  any  default  in 
making  or  rendering  such  list  or  return,  with  the  declara- 
tion annexed,  or  of  the  payment  of  the  duty  as  aforesaid, 
the  company  making  such  default  shall  forfeit  as  a  penalty 
the  sum  of  one  thousand  dollars;  and  in  case  of  any  default 
in  making  or  rendering  said  list  or  return,  or  of  the  pay- 
ment of  the  duty,  or  any  part  thereof,  as  aforesaid,  the  as- 
sessment and  collection  of  the  duty  and  penalty  shall  be 
made  according  to  the  provisions  of  law  in  other  cases  of 
neglect  or  refusal. 


FEDERAL  INCOME  TAX  ACTS  213 

Sec.  123.  And  be  it  further  enacted,  That  there  shall  be 
levied,  collected,  and  paid,  on  all  salaries  of  officers,  or 
payments  for  Services  to  persons  in  the  civil,  military,  na- 
val, or  other  employment  or  service  of  the  United  States, 
including  senators  and  representatives  and  delegates  in 
Congress,  when  exceeding  the  rate  of  six  hundred  dollars 
per  annum,  a  duty  of  five  per  centum  on  the  excess  above 
the  said  six  hundred  dollars;  and  it  shall  be  the  duty  of  all 
paymasters,  and  all  disbursing  officers,  under  the  govern- 
ment of  the  United  States,  or  in  the  employ  thereof,  when 
making  any  payments  to  officers  and  persons  as  aforesaid 
or  upon  settling  and  adjusting  the  accounts  of  such  officers 
and  persons,  to  deduct  and  withhold  the  aforesaid  duty  of 
five  per  centimi,  and  shall,  at  the  same  time,  make  a  cer- 
tificate stating  the  name  of  the  officer  or  person  from  whom 
such  deduction  was  made,  and  the  amount  thereof,  which 
shall  be  transmitted  to  the  office  of  the  commissioner  of 
internal  revenue,  and  entered  as  part  of  the  internal  du- 
ties; and  the  pay-roll,  receipts  or  account  of  officers  or  per- 
sons paying  such  duty,  as  aforesaid,  shall  be  made  to  exhibit 
the  fact  of  such  payment.  And  it  shall  be  the  duty  of  the 
several  auditors  of  the  Treasury  Department,  when  audit- 
ing the  accounts  of  any  paymaster  or  disbursing  officer,  or 
when  settling  or  adjusting  the  accounts  of  any  such  officer, 
to  require  evidence  that  the  duties  or  taxes  mentioned  in 
this  section  have  been  deducted  or  paid  over  to  the  com- 
missioner of  internal  revenue:  Provided,  That  payments 
or  prize  money  shall  be  regarded  as  income  from  salaries, 
and  the  duty  thereon  shall  be  adjusted  and  collected  in 
like  manner. 


Sec.  178.  And  be  it  further  eiiacted,  That  consuls  of 
foreign  countries  in  the  United  States,  who  are  not  citizens 
thereof,  shall  be,  and  hereby  are,  exempt  from  any  income 
tax  imposed  by  this  act  which  may  be  derived  from  their 
official  emoluments,  or  from  property  in  such  countries: 


214  APPENDIX  [Act,  June  30,  1864 

Provided,  That  the  governments  which  such  consuls  may 
represent  shall  extend  similar  exemptions  to  consuls  of 
the  United  States. 


Sec.  182.  And  be  it  further  enacted,  That  wherever  the 
word  state  is  used  in  this  act,  it  shall  be  construed  to  in- 
clude the  territories  and  the  District  of  Columbia,  where 
such  construction  is  necessary  to  carry  out  the  provision  of 
this  act. 


JOINT  RESOLUTION  OF  JULY  4,   1864 » 

[No.  77]  Joint  Resolution  Imposing  a  Special  Income 

Duty 

Be  it  resolved  by  the  Senate  and  House  of  Representatives 
of  the  limited  States  of  America  in  Congress  assembled. 

That,  in  addition  to  the  income  duty  already  imposed 
by  law,  there  shall  be  levied,  assessed,  and  collected  on 
the  first  day  of  October,  eighteen  hundred  and  sixty-four, 
a  special  income  duty  upon  the  gains,  profits,  or  income 
for  the  year  ending  the  thirty-first  day  of  December  next 
preceding  the  time  herein  named,  by  levying,  assessing, 
and  collecting  said  duty  of  all  persons  residing  within  the 
United  States,  or  of  citizens  of  the  United  States  residing 
abroad,  at  the  rate  of  five  per  centum  on  all  sums  exceed- 
ing six  hundred  dollars,  and  the  same  shall  be  levied, 
assessed,  estimated,  and  collected,  except  as  to  the  rate, 
according  to  the  provisions  of  existing  laws  for  the  col- 
lection of  an  income  duty,  annually,  where  not  inappli- 
cable hereto;  and  the  Secretary  of  the  Treasury  is  hereby 
authorized  to  make  such  rules  and  regulations  as  to  time 
and  mode,  or  other  matters  to  enforce  the  collection  of 
the  special  income  duty  herein  provided  for,  as  may  be 
necessary:  Provided,  That  in  estimating  the  annual  gains, 
profits,  or  income,  as  aforesaid,  for  the  foregoing  special 
income  duty,  no  deductions  shall  be  made  for  dividends  oi" 
interest  received  from  any  association,  corporation,  oi 
company,  nor  shall  any  deduction  be  made  for  any  salary 
or  pay  received. 

» 13  U.  S.  Stat,  at  Large,  417. 
215 


ACT  OF  MARCH  3,   1865  ^ 

Chapter  LXXVIII. — An  Act  to  amend  an  Act  entitled  "An 
Act  to  provide  Internal  Revenite  to  support  the  Govern- 
ment, to  pay  Interest  on  the  Public  Debt,  and  for  other 
Purposes.' '  Approved  June  thirtieth,  eighteen  hun- 
dred and  sixty-four. 


Be  it  enacted,  That  section  one  hundred  and  three  be 
amended  by  adding  the  following  after  the  word  ''vehicle," 
where  it  occurs  the  second  time  in  the  section:  "Provided, 
That  this  section  shall  not  apply  to  those  teams,  wagons, 
and  vehicles  used  in  the  transportation  of  silver  ores  from 
the  mines  where  the  same  is  (are)  excavated  to  the  place 
where  they  are  reduced  or  worked." 

That  section  one  hundred  and  three  be  further  amended 
by  inserting  after  the  words  ''and  any  foreign  port," 
the  words,  "but  such  duty  shall  be  assessed  upon  the 
transportation  of  persons  and  property  shipped  from  a 
port  within  the  United  States,  through  a  foreign  terri- 
tory, to  a  port  within  the  United  States,  and  shall  be 
assessed  upon,  and  collected  from,  persons,  firms,  com- 
panies, or  corporations  within  the  United  States  receiv- 
ing such  freight  or  transportation."  And  that  section 
one  hundred  and  three  be  amended  by  adding  at  the  end 
of  said  section  the  following:  "And  provided,  further,  That 
no  tax  under  this  section  shall  be  assessed  upon  any  person 
whose  gross  receipts  do  not  exceed  one  thousand  dollars 
per  annum." 

That  section  one  hundred  and  five  be  amended  by 
striking  out,  at  the  end  thereof,  the  words  "for  the  quarter 
then  next  preceding." 

1 13  U.  S.  Stat,  at  Large,  469. 
2i6 


FEDERAL  INCOME  TAX  ACTS  217 

That  section  one  hundred  and  nine  be  amended  by 
striking  out,  after  the  words  ''one  hundred  and,"  the  word 
"two,"  and  inserting  in  lieu  thereof  the  word  "three." 

That  section  one  hundred  and  ten  be  amended  by  strik- 
ing out,  after  the  words  "and  redemption  thereof,"  the 
words  "nor  to  any  savings  bank  having  no  capital  stock, 
and  whose  business  is  confined  to  receiving  deposits  and 
loaning  the  same  on  interest  for  the  benefit  of  the  deposi- 
tors only,  and  which  do  no  other  business  of  banking." 

That  section  one  hundred  and  sixteen  be  amended  by 
striking  out  all  after  the  enacting  clause,  and  inserting, 
in  lieu  thereof,  the  following: 

"That  there  shall  be  levied,  collected,  and  paid  annually 
upon  the  annual  gains,  profits,  and  income  of  every  person 
residing  in  the  United  States,  or  of  any  citizen  of  the  United 
States  residing  abroad,  whether  derived  from  any  kind  of 
property,  rents,  interests,  dividends,  or  salaries,  or  from 
any  profession,  trade,  employment,  or  vocation,  carried 
on  in  the  United  States  or  elsewhere,  or  from  any  other 
source  whatever,  a  duty  of  five  per  centum  on  the  excess 
over  six  hundred  dollars  and  not  exceeding  five  thousand 
dollars,  and  a  duty  of  ten  per  centum  on  the  excess  over 
five  thousand  dollars;  and  in  ascertaining  the  income  of 
any  person  liable  to  an  income  tax,  the  amount  of  in- 
come received  from  institutions  whose  officers,  as  required 
by  law,  withhold  a  per  centum  of  the  dividends  made  by 
such  institutions,  and  pay  the  same  to  the  commissioner 
of  internal  revenue,  or  other  officer  authorized  to  receive 
the  same,  shall  be  included:  and  the  amount  so  withheld 
shall  be  deducted  from  the  tax  which  otherwise  would  be 
assessed  upon  such  person.  And  the  duty  herein  provided 
for  shall  be  assessed,  collected,  and  paid  upon  the  gains, 
profits,  and  income  for  the  year  ending  the  thirty-first 
day  of  December,  next  preceding  the  time  for  levying, 
collecting,  and  paying  said  duty:  Provided,  That  incomes 
derived  from  interest  upon  notes,  bonds,  and  other  se- 
curities of  the  United  States,  and  also  all  premiums  on 


218  APPENDIX  [Act,  Mch.  3,  1865 

gold  and  coupons  shall  be  included  in  estimating  incomes 
under  this  section.  Provided,  further,  That  only  one 
deduction  of  six  hundred  dollars  shall  be  made  from  the 
aggregate  incomes  of  all  the  members  of  any  family  com- 
posed of  parents  and  minor  children,  or  husband  and  wife: 
And  provided,  further.  That  net  profits  realized  by  sales 
of  real  estate  purchased  within  the  year,  for  which  in- 
come is  estimated,  shall  be  chargeable  as  income;  and 
losses  on  sales  of  real  estate  purchased  within  the  year, 
for  which  income  is  estimated,  shall  be  deducted  from 
the  income  of  such  year." 

That  section  one  hundred  and  seventeen  be  amended 
by  striking  out  all  after  the  enacting  clause,  and  inserting 
in  lieu  thereof  the  following: 

"That  in  estimating  the  annual  gains,  profits,  and  in- 
come of  any  person,  all  national,  state,  county,  and  muni- 
cipal taxes  paid  within  the  year  shall  be  deducted  from 
the  gains,  profits,  or  income  of  the  person  who  has  actually 
paid  the  same,  whether  owner,  tenant,  or  mortgagor; 
also  the  salary  or  pay  received  for  services,  in  the  civil, 
military,  naval,  or  other  service  of  the  United  States, 
including  senators,  representatives,  and  delegates  in 
Congress,  above  the  rate  of  six  hundred  dollars  per  annum; 
also  the  amount  paid  by  any  person  for  the  rent  of  the 
homestead  used  or  occupied  by  himself  or  his  family,  and 
the  rental  value  of  any  homestead,  used  or  occupied  by 
any  person  or  by  his  family,  in  his  own  right,  or  in  the 
right  of  his  wife,  shall  not  be  included  and  assessed  as 
part  of  the  income  of  such  person.  In  estiinating  the 
annual  gains,  profits,  or  income  of  any  person,  the  interest, 
received  or  accrued  upon  all  notes,  bonds,  and  mort- 
gages, or  other  forms  of  indebtedness  bearing  interest 
whether  paid  or  not,  if  good  and  collectible,  less  the  inter- 
est paid  by  or  due  from  such  person,  shall  be  included  and 
assessed  as  part  of  the  income  of  such  person  for  each  year; 
and  also  all  income  or  gains  derived  from  the  purchase 
and  sale  of  stocks  or  other  property,  real  or  personal,  and 


FEDERAL  INCOME  TAX  ACTS  219 

of  live  stock,  and  the  amount  of  live  stock,  sugar,  wool, 
butter,  cheese,  pork,  beef,  mutton,  or  other  meats,  hay 
and  grain,  or  other  vegetable  or  other  productions,  being 
the  growth  or  produce  of  the  estate  of  such  person  sold, 
not  including  any  part  thereof  unsold  or  on  hand  during 
the  year  next  preceding  the  thirty-first  of  December,  until 
the  same  shall  be  sold,  shall  be  included  and  assessed  as 
part  of  the  income  of  such  person  for  each  year,  and  his 
share  of  the  gains  and  profits  of  all  companies,  whether 
incorporated  or  partnership,  shall  be  included  in  esti- 
mating the  annual  gains,  profits,  or  income  of  any  person 
entitled  to  the  same,  whether  divided  or  otherwise.  In 
estimating  deductions  from  income,  as  aforesaid,  when 
any  person  rents  buildings,  lands,  or  other  property,  or 
hires  labor  to  cultivate  land,  or  to  conduct  any  other 
business  from  which  such  income  is  actually  derived,  or 
pays  interest  upon  any  actual  incumbrance  thereon,  the 
amount  actually  paid  for  such  rent,  labor,  or  interest 
shall  be  deducted;  and  also  the  amount  paid  out  for 
usual  or  ordinary  repairs,  not  exceeding  the  average  paid 
out  for  such  purposes  for  the  preceding  five  years,  shall 
be  deducted,  but  no  deduction  shall  be  made  for  any 
amount  paid  out  for  new  buildings,  permanent  improve- 
ments, or  betterments,  made  to  increase  the  value  of  any 
property  or  estate:  Provided,  That  in  cases  where  the 
salary  or  other  compensation  paid  to  any  person  in  the 
employment  or  service  of  the  United  States  shall  not 
exceed  the  rate  of  six  hundred  dollars  per  annum,  or  shall 
be  by  fees,  or  uncertain  or  irregular  in  the  amount  or  in 
the  time  during  which  the  same  shall  have  accrued  or  been 
earned,  such  salary  or  other  compensation  shall  be  in- 
cluded in  estimating  the  annual  gains,  profits,  or  income 
to  whom  the  same  shall  have  been  paid,  in  such  manner 
as  the  commissioner  of  internal  revenue,  under  the  direc- 
tion of  the  Secretary  of  the  Treasury,  may  prescribe." 
That  section  one  hundred  and  eighteen  be  amended  by 
striking  out  all  after  the  enacting  clause,  and  inserting 


220  APPENDIX  [Act,  Mch.  3,  1805 

in  lieu  thereof  the  words,  ''That  it  shall  be  the  duty  of  all 
persons  of  lawful  age  to  make  and  render  a  Ust  or  return, 
in  such  form  and  manner  as  may  be  prescribed  by  the 
commissioner  of  internal  revenue,  to  the  assistant  as- 
sessor of  the  district  in  which  they  reside,  of  the  amount 
of  their  income,  gains,  and  profits,  as  aforesaid;  and  all 
guardians  and  trustees,  whether  as  executors,  adminis- 
trators, or  in  any  other  fiduciary  capacity,  shall  make  and 
render  a  list  or  return,  as  aforesaid,  to  the  assistant  asses- 
sor, of  the  district  in  which  such  guardians  or  trustees  re- 
side, of  the  amount  of  income,  gains,  and  profits  of  any 
minor  or  person  for  whom  they  act  as  guardian  or  trustee; 
and  the  assistant  assessor  shall  require  every  list  or  return 
to  be  verified  by  the  oath  or  affirmation  of  the  party  render- 
ing it,  and  may  increase  the  amount  of  any  list  or  return, 
if  he  has  reason  to  believe  that  the  same  is  understated; 
and  in  case  any  person,  guardian,  or  trustee  shall  neglect 
or  refuse  to  make  and  render  such  list  or  return,  or  shall 
render  a  false  or  fraudulent  list  or  return,  it  shall  be  the 
duty  of  the  assessor  or  the  assistant  assessor  to  make 
such  list,  according  to  the  best  information  he  can  obtain, 
by  the  examination  of  such  person,  and  his  books  and 
accounts  or  any  other  evidence,  and  to  add  twenty-five 
per  centum  as  a  penalty  to  the  amount  of  the  duty  due 
on  such  list  in  all  cases  of  wilful  neglect  or  refusal  to 
make  and  render  a  list  or  return,  and,  in  all  cases  of  a 
false  or  fraudulent  Hst  or  return  having  been  rendered, 
to  add  one  hundred  per  centum,  as  a  penalty,  to  the 
amount  of  duty  ascertained  to  be  due,  the  duty  and  the 
additions  thereto  as  penalty  to  be  assessed  and  collected 
in  the  manner  provided  for  in  other  cases  of  wilful  neglect 
or  refusal  to  render  a  list  or  return,  or  of  rendering  a  false 
and  fraudulent  return:  Provided,  That  any  party,  in  his 
or  her  own  behalf,  or  as  guardian  or  trustee,  shall  be  per- 
mitted to  declare,  under  oath  or  affirmation,  the  form  and 
manner  of  which  shall  be  prescribed  by  the  commissioner 
of  internal  revenue,  that  he  or  she,  or  his  or  her  ward  or 


FEDERAL  INCOME  TAX  ACTS  221 

beneficiary,  was  not  possessed  of  an  income  of  six  hundred 
dollars,  liable  to  be  assessed  according  to  the  provisions 
of  this  act ;  or  may  declare  that  he  or  she  has  been  assessed 
and  paid  an  income  duty  elsewhere  in  the  same  year,  under 
authority  of  the  United  States,  upon  his  or  her  gains  and 
profits,  as  prescribed  by  law,  and  if  the  assistant  assessor 
shall  be  satisfied  of  the  truth  of  the  declaration,  shall 
thereupon  be  exempt  from  income  duty  in  said  district; 
or  if  the  list  or  return  of  any  party  shall  have  been  increased 
by  the  assistant  assessor,  such  party  may  exhibit  his  books 
and  accounts,  and  be  permitted  to  prove  and  declare, 
under  oath  or  affirmation,  the  amount  of  annual  income 
liable  to  be  assessed;  but  such  oaths  and  evidence  shall 
not  be  considered  as  conclusive  of  the  facts,  and  no  de- 
ductions claimed  in  such  cases  shall  be  made  or  allowed 
until  approved  by  the  assistant  assessor.  Any  person 
feeling  aggrieved  by  the  decision  of  the  assistant  assessor 
in  such  cases  may  appeal  to  the  assessor  of  the  district, 
and  his  decision  thereon,  unless  reversed  by  the  commis- 
sioner of  internal  revenue,  shall  be  final,  and  the  form, 
time,  and  manner  of  proceedings  shall  be  subject  to  rules 
and  regulations  to  be  prescribed  by  the  conmiissioner  of 
internal  revenue." 

That  section  one  hundred  and  nineteen  be  amended  by 
striking  out  the  words  "for  thirty  days,"  and  after  the 
words  "for  ten  days  after,"  inserting  the  words  "notice 
and." 

That  section  one  hundred  and  twenty  be  amended  by 
striking  out,  at  the  end  thereof,  the  word  "act,"  and  in- 
serting in  lieu  thereof  the  word  "section." 


ACT  OF  MARCH  10,  1866  » 

Chap.  XV. — An  Act  to  declare  the  Meaning  of  certain 
Parts  of  the  Internal  Revenue  Act,  approved  June  thirty, 
eighteen  hundred  and  sixty-four  and  for  other  purposes. 

Be  it  enacted  hy  the  Senate  and  House  of  Representatives 
of  the  United  States  of  America  in  Congress  assembled,  That 
in  section  one  hundred  and  twenty  of  the  act  entitled  "An 
act  to  provide  internal  revenue  to  support  the  Govern- 
ment, to  pay  interest  on  the  public  debt,  and  for  other 
purposes,"  approved  June  thirty,  eighteen  hundred  and 
sixty-four,  the  words:  "all  dividends  in  scrip,  or  money 
thereafter  declared  due,  and  whenever  the  same  shall  be 
payable,  to  stockholders,  policy-holders  or  depositors," 
are  hereby  declared  to  mean  all  dividends  in  scrip  or  money 
wherever  payable,  and  all  stock-holders,  policy-holders, 
depositors  or  parties  whatsoever,  including  non-residents, 
whether  citizens  or  aliens. 

Sec.  2.  And  be  it  further  enacted.  That  in  section  one 
hundred  and  twenty-two  of  said  act  the  word  "stock- 
holders" is  hereby  declared  to  mean  all  persons  or  parties 
whatsoever  that  are  or  may  be  stockholders,  including  non- 
residents, whether  citizens  or  aliens;  and  the  words  "all 
such  interest  or  coupons,  dividends  or  profits,  whenever 
the  same  shall  be  payable,"  are  hereby  declared  to  apply 
to  all  such  interest  or  coupons,  dividends  or  profits,  wher- 
ever the  same  are  or  may  be  payable,  and  to  whatso- 
ever party  or  person  the  same  are  or  may  be  payable, 
including  non-residents,  whether  citizens  or  aliens. 

Sec.  3.  And  be  it  further  enacted.  That  it  shall  be  the 
duty  of  all  persons  required  to  make  returns  or  lists  of 

1 14  U.  S.  Stat,  at  Large,  4. 
222 


FEDERAL  INCOME  TAX  ACTS  223 

income  and  articles  or  objects  charged  with  any  duty  or 
tax,  as  provided  by  the  act  aforesaid,  or  any  act  amenda- 
tory thereof,  to  declare  in  such  returns  whether  the  sev- 
eral rates  and  amounts  therein  contained  are  stated  accord- 
ing to  their  values  in  legal  tender  currency;  and  in  case  of 
neglect  or  refusal  so  to  state,  to  the  satisfaction  of  the 
assistant  assessor  receiving  such  returns  or  lists,  such 
assistant  assessor  is  hereby  required  to  make  returns  or 
lists  for  such  persons  so  neglecting  or  refusing,  as  in  case 
of  persons  neglecting  or  refusing  to  make  the  lists  or 
returns  required  by  the  acts  aforesaid,  and  to  assess  the 
duty  thereon,  and  to  add  thereto  the  amount  of  penalties 
imposed  by  law  in  case  of  such  neglect  or  refusal. 

Sec.  4.  And  he  it  further  enacted,  That  whenever  the 
rates  and  amounts  contained  in  the  lists  or  returns  as 
aforesaid  shall  be  stated  in  coined  money,  it  shall  be  the 
duty  of  each  assessor  receiving  the  same  to  reduce  such 
rates  and  amounts  to  their  equivalent  in  legal  tender 
currency,  according  to  the  value  of  such  coined  money  in 
said  currency  at  the  time  when  and  place  where  said  lists 
or  returns  are  receivable,  and  which  value  the  said  asses- 
sor shall  determine.  And  the  lists  required  by  law  to  be 
furnished  to  collectors  by  assessors  shall  in  all  cases  con- 
tain the  several  amounts  of  taxes  or  duties  assessed,  esti- 
mated, or  valued  in  legal  tender  currency  only. 

Sec.  5.  And  he  it  further  enacted,  That  the  provisions  of 
this  act  shall,  so  far  as  necessary,  apply  to  all  returns, 
lists,  assessments,  and  collections  required  by  the  acts 
aforesaid  in  addition  to  those  above  mentioned,  by  whom- 
soever made,  returned,  assessed,  or  collected,  in  any  mode 
or  for  any  purpose  whatever.  And  the  Commissioner  of 
Internal  Revenue,  under  the  direction  of  the  Secretary  of 
the  Treasury,  is  hereby  authorized  to  make  all  necessary 
rules  and  regulations  for  carrying  this  act  into  effect. 


ACT  OF  JULY  13,  1866  * 

Chapter  CLXXXIV. — An  Act  to  reduce  Internal  Taxation 
and  to  amend  an  Act  entitled  ^^  An  Act  to  provide  Internal 
Revenue  to  support  the  Government,  to  pay  Interest  on  the 
Public  Debt,  and  for  other  Purposes,''  approved  June 
Thirtieth,  eighteen  hundred  and  sixty-four,  and  Acts 
amendatory  thereof. 

I 
Sec.  9.  And  be  it  further  enacted,  That  the  act  entitled 
"Ah  Act  to  provide  Internal  Revenue  to  support  the  Gov- 
ernment, to  pay  interest  on  the  public  debt;  and  for  other 
purposes,"  approved  June  thirty,  eighteen  hundred  and 
sixty-four,  as  amended  by  the  Act  of  March  third,  eight- 
een hundred  and  sixty-five,  be  and  the  same  is  hereby 
amended,  as  follows. 


*  *  *  *  That  section  one  hundred  and  three  be 
amended  by  striking  out  all  after  the  enacting  clause, 
and  inserting  in  lieu  thereof  the  following:  That  every 
person,  firm,  company,  or  corporation  owning  or  possess- 
ing or  having  the  care  or  management  of  any  railroad, 
canal,  steamboat,  ship,  barge,  canal-boat,  or  other  vessel, 
or  any  stage-coach,  or  other  vehicle,  except  hacks  or  car- 
riages not  running  on  continuous  routes,  engaged  or  em- 
ployed in  the  business  of  transporting  passengers  for  hire, 
or  in  transporting  the  mails  of  the  United  States  upon 
contracts  made  prior  to  August  first,  eighteen  hundred 
and  sixty-six,  shall  be  subject  to  and  pay  a  tax  of  two  and 
one  half  per  cent.,  of  the  gross  receipts  from  passengers 
and  mails  of  such  railroad,  canal,  steamboat,  ship,  barge, 

1 14  U.  S.  Stat,  at  Large,  98. 
224 


FEDERAL  INCOME  TAX  ACTS  225 

canal-boat,  or  other  vessel,  or  such  stage-coach  or  other 
vehicle:  Provided, That  the  tax  hereby  imposed  shall  not 
be  assessed  upon  receipts  for  the  transportation  of  persons 
or  mails  between  the  United  States  and  any  foreign  port ; 
but  such  tax  shall  be  assessed  upon  the  transportation 
of  persons  from  a  port  within  the  United  States  through  a 
foreign  territory  to  a  port  within  the  United  States,  and 
shall  be  assessed  upon  and  collected  from  persons,  firms, 
companies,  or  corporations  within  the  United  States, 
receiving  hire  or  pay  for  such  transportation  of  persons 
or  mails;  and  so  much  of  section  one  hundred  and  nine 
as  requires  returns  to  be  made  of  receipts  hereby  exempted 
from  tax  when  derived  from  transporting  property  for 
hire  is  hereby  repealed :  Provided,  also.  That  any  person  or 
persons,  firms,  companies,  or  corporations  owning,  pos- 
sessing, or  having  the  care  or  management  of  any  toll-road, 
ferry,  or  bridge,  authorized  by  law  to  receive  toll  for  the 
transit  of  passengers,  beasts,  carriages,  teams,  and  freight 
of  any  description,  over  such  toll-road,  ferry,  or  bridge, 
shall  be  subject  to  and  pay  a  tax  of  three  per  centum  of  the 
gross  amount  of  all  their  receipts  of  every  description;  but 
when  the  gross  receipts  of  any  such  bridge  or  toll-road,  for 
and  during  any  term  of  twelve  consecutive  calendar 
months,  shall  not  exceed  the  amount  necessarily  expended 
during  said  term  to  keep  such  bridge  or  road  in  repair,  no 
tax  shall  be  assessed  upon  such  receipts  during  the  month 
next  following  any  such  term:  Provided,  further,  That  all 
such  persons,  companies,  and  corporations  shall,  until  the 
thirtieth  day  of  April,  eighteen  hundred  and  sixty-seven, 
have  the  right  to  add  the  tax  imposed  hereby  to  their  rates 
of  fare  whenever  their  liability  thereto  may  commence, 
any  limitations  which  may  exist  by  law  or  by  agree- 
ment, with  any  person  or  company  which  may  have  paid 
or  be  liable  to  pay  such  fare,  to  the  contrary  notwithstand- 
ing. And  whenever  the  addition  to  any  fare  shall  amount 
only  to  the  fraction  of  one  cent,  any  person,  or  company, 
liable  to  the  tax  of  two  and  a  half  per  centum,  may  add  to 


226  APPENDIX  [Act,  July  13,  1866 

such  fare  one  cent,  in  lieu  of  such  fraction;  and  such  person 
or  company  shall  keep  for  sale,  at  convenient  points, 
tickets  in  packages  of  twenty  and  multiples  of  twenty, 
to  the  price  of  which  only  an  amount  equal  to  the  revenue 
tax  shall  be  added:  And  provided,  further,  That  no  tax 
imder  the  foregoing  provisions  of  this  section  shall  be 
assessed  upon  any  person,  firm,  company,  or  corporation, 
whose  gross  receipts  do  not  exceed  one  thousand  dollars 
per  annum:  And  provided  further,  That  all  boats,  barges, 
and  fiats  not  used  for  carrying  passengers  nor  propelled 
by  steam  or  sails,  which  are  floated  or  towed  by  tug-boats 
or  horses,  and  used  exclusively  for  carrying  coal,  oil, 
minerals,  or  agricultural  products  to  market,  shall  be 
required  hereafter,  in  lieu  of  enrolment-  fees  or  tonnage 
tax,  to  pay  an  annual  special  tax,  for  each  and  every  such 
boat  of  a  capacity  exceeding  twenty-five  tons,  and  not 
exceeding  one  hundred  tons,  five  dollars;  and  when  exceed- 
ing one  hundred  tons,  shall  be  required  to  pay  ten  dollars; 
and  said  tax  shall  be  assessed  and  collected  as  other  special 
taxes  provided  for  in  this  act. 

That  section  one  hundred  and  seven  be  amended  by 
striking  out  afl  after  the  enacting  clause  and  inserting 
in  lieu  thereof  the  following:  That  any  person,  firm,  com- 
pany, or  corporation  owning  or  possessing  or  having  the 
care  or  management  of  any  telegraphic  line  by  which 
telegraphic  despatches  or  messages  are  received  or  trans- 
mitted, shall  be  subject  to  and  pay  a  tax  of  three  per 
centum  on  the  gross  amount  of  all  receipts  of  such  person, 
firm,  company,  or  corporation. 

That  section  one  hundred  and  ten  be  amended  by 
striking  out  all  after  the  enacting  clause,  and  inserting 
in  lieu  thereof  the  following:  That  there  shall  be  levied, 
collected,  and  paid  a  tax  of  one  twenty-fourth  of  one  per 
centum  each  month  upon  the  average  amount  of  the  de- 
posits of  money,  subject  to  payment  by  check  or  draft, 
or  represented  by  certificates  of  deposit  or  otherwise, 
whether  payable  on  demand  or  at  some  future  day,  with 


FEDERAL  INCOME  TAX  ACTS  227 

"any  person,  bank,  association,  company,  or  corporation 
engaged  in  the  business  of  banking;  and  a  tax  of  one 
twenty-fourth  of  one  per  centum  each  month,  as  aforesaid, 
upon  the  capital  of  any  bank,  association,  company,  or 
corporation,  and  on  the  capital  employed  by  any  person 
in  the  business  of  banking  beyond  the  average  amount 
invested  in  United  States  bonds;  and  a  tax  of  one  twelfth 
of  one  per  centum  each  month  upon  the  average  amount 
of  circulation  issued  by  any  bank,  association,  corporation, 
company,  or  person,  including  as  circulation  all  certified 
checks  and  all  notes  and  other  obligations  calculated  or 
intended  to  circulate  or  to  be  used  as  money,  but  not  in- 
cluding that  in  the  vault  of  the  bank,  or  redeemed  and  on 
deposit  for  said  bank;  and  an  additional  tax  of  one  sixth 
of  one  per  centum,  each  month,  upon  the  average  amount 
of  such  circulation,  issued  as  aforesaid,  beyond  the  amount 
of  ninety  per  centum  of  the  capital  of  any  such  bank, 
association,  corporation,  company,  or  person.  And  a 
true  and  accurate  return  of  the  amount  of  circulation, 
of  deposit,  and  of  capital,  as  aforesaid,  and  of  the  amount 
of  notes  of  persons,  state  banks,  or  state  banking  associa- 
tions, paid  out  by  them  for  the  previous  month,  shall  be 
made  and  rendered  monthly  by  each  of  such  banks, 
associations,  corporations,  companies,  or  persons  to  the 
assessor  of  the  district  in  which  any  such  bank,  association, 
corporation,  or  company  may  be  located,  or  in  which  such 
person  has  his  place  of  business,  with  a  declaration  an- 
nexed thereto,  and  the  oath  or  affirmation  of  such  person, 
or  of  the  president  or  cashier  of  such  bank,  association, 
corporation,  or  company,  in  such  form  and  manner  as 
may  be  prescribed  by  the  commissioner  of  internal  rev- 
enue, that  the  same  contains  a  true  and  faithful  state- 
ment of  the  amounts  subject  to  tax  as  aforesaid;  and  for 
any  refusal  or  neglect  to  make  or  to  render  return  and 
payment,  any  such  bank,  association,  corporation,  com- 
pany, or  person  so  in  default,  shall  be  subject  to  and  pay 
a  penalty  of  two  hundred  dollars,  besides  the  additional 


228  APPENDIX  [Act,  July  13,  1866 

penalty  and  forfeitures  in  other  cases  provided  by  law; 
and  the  amount  of  circulation,  deposit,  capital,  and  notes 
of  persons,  state  banks,  and  banking  associations  paid  out, 
as  aforesaid,  in  default  of  the  proper  return,  shall  be  esti- 
mated by  the  assessor  or  assistant  assessor  of  the  district 
as  aforesaid,  upon  the  best  information  he  can  obtain; 
and  every  such  penalty  may  be  recovered  for  the  use  of 
the  United  States  in  any  court  of  competent  jurisdiction. 
And  in  the  case  of  banks  with  branches,  the  tax  herein 
provided  for  shall  be  assessed  upon  the  circulation  of 
each  branch,  severally,  and  the  amount  of  capital  of  each 
branch  shall  be  considered  to  be  the  amount  allotted  to 
such  branch;  and  so  much  of  an  act  entitled  ''An  act  to 
provide  ways  and  means  for  the  support  of  the  govern- 
ment," approved  March  three,  eighteen  hundred  and 
sixty-three,  as  imposes  any  tax  on  banks,  their  circula- 
tion, capital,  or  deposits,  other  than  as  herein  provided, 
is  hereby  repealed:  Provided,  That  this  section  shall  not 
apply  to  associations  which  are  taxed  under  and  by  virtue 
of  the  act  'Ho  provide  a  national  currency  secured  by  a 
pledge  of  the  United  States  bonds,  and  to  provide  for  the 
circulation  and  redemption  thereof."  And  the  deposits 
in  associations  or  companies  known  as  Provident  Institu- 
tions, Savings  Banks,  Savings  Funds,  or  Savings  Institu- 
tions, having  no  capital  stock  and  doing  no  other  business 
than  receiving  deposits  to  be  loaned  or  invested  for  the 
sole  benefit  of  the  parties  making  such  deposits,  without 
profit  or  compensation  to  the  association  or  company, 
shall  be  exempt  from  tax  on  so  much  of  their  deposits 
as  they  have  invested  in  securities  of  the  United  States, 
and  on  all  deposits,  less  than  five  hundred  dollars,  made 
in  the  name  of  any  one  person;  and  the  returns  required 
to  be  made  by  such  Provident  Institutions  and  Savings 
Banks  after  July,  eighteen  hundred  and  sixty-six,  shall 
be  made  on  the  first  Monday  of  January  and  July  of  each 
year,  in  such  form  and  manner  as  may  be  prescribed  by 
the  commissioner  of  internal  revenue. 


FEDERAL  INCOME  TAX  ACTS  229 

That  section  one  hundred  and  eleven  be  amended  by- 
inserting  after  the  words  ''proprietors,  managers,  or  agents 
of  lotteries,"  the  words:  ''and  all  lottery  ticket  dealers." 

That  section  one  himdred  and  fourteen  be  amended  by- 
inserting  after  the  word  "periodically,"  in  the  first  sen- 
tence of  said  section,  the  words:  or  otherwise,  or  publish- 
ing any  guide,  almanac,  catalogue,  directory,  or  any  other 
paper  or  book. 

That  section  one  hundred  and  sixteen  be  amended  by 
inserting  after  the  words,  "on  the  excess  over  five  thousand 
dollars,"  the  following:  and  a  like  tax  shall  be  levied, 
collected,  and  paid,  annually  upon  the  gains,  profits, 
and  income  of  every  business,  trade,  or  profession  carried 
on  in  the  United  States  by  persons  residing  without 
the  United  States,  not  citizens  thereof. 

That  .section  one  hundred  and  nineteen  be  amended  by 
striking  out  all  after  the  enacting  clause  and  inserting  in 
lieu  thereof  the  following:  That  the  taxes  on  incomes 
herein  imposed  shall  be  levied  on  the  first  day  of  May, 
and  be  due  and  payable  on  or  before  the  thirtieth  day  of 
June,  in  each  year,  until  and  including  the  year  eighteen 
hundred  and  seventy,  and  no  longer;  and  to  any  sum  or 
sums  annually  due  and  unpaid  after  the  thirtieth  of  June, 
as  aforesaid,  and  for  ten  days  after  notice  and  demand 
thereof  by  the  collector,  there  shall  be  levied,  in  addition 
thereto,  the  sum  of  ten  per  centum  on  the  amount  of  duties 
unpaid,  as  a  penalty,  except  from  the  estates  of  deceased 
or  insolvent  persons. 

That  section  one  hundred  and  twenty  be  amended  by 
striking  out  all  after  the  enacting  clause  and  inserting 
in  lieu  thereof  the  following:  That  there  shall  be  levied 
and  collected  a  tax  of  five  per  centum  on  all  dividends 
in  scrip  or  money  thereafter  declared  due  wherever,  and 
whenever  the  same  shall  be  payable,  to  stockholders, 
policy-holders,  or  depositors,  or  parties  whatsoever,  in- 
cluding non-residents,  whether  citizens  or  aliens,  as  part 
of  the  earnings,  income,  or  gains  of  any  bank,  trust  com- 


230  APPENDIX  [Act,  July  13,  1866 

pany,  savings  institution,  and  of  any  fire,  maritie,  life, 
inland,  insurance  company,  either  stock  or  mutual,  under 
whatever  name  or  style  known  or  called,  in  the  United 
States  or  Territories,  whether  specially  incorporated  or 
existing  under  general  laws,  and  on  all  undistributed  sums, 
or  sums  made  or  added  during  the  year  to  their  surplus 
or  contingent  funds;  and  said  banks,  trust  companies, 
savings  institutions,  and  insurance  companies  shall  pay 
the  said  tax,  and  are  hereby  authorized  to  deduct  and 
withhold  from  all  payments  made  on  account  of  any 
dividends  or  sums  of  money  that  may  be  due  and  payable 
as  aforesaid  the  said' tax  of  five  per  centum.  And  a  list 
or  return  shall  be  made  and  rendered  to  the  assessor  or 
assistant  assessor  on  or  before  the  tenth  day  of  the  month 
following  that  in  which  any  dividends  or  sums  of  money 
become  due  or  payable  as  aforesaid;  and  said  list  or  re- 
turn shall  contain  a  true  and  faithful  account  of  the  amount 
of  taxes  as  aforesaid;  and  there  shall  be  annexed  thereto 
a  declaration  of  the  president,  cashier,  or  treasurer  of  the 
bank,  trust  company,  savings  institution,  or  insurance 
company,  under  oath  or  affirmation  in  form  and  manner, 
as  may  be  prescribed  by  the  commissioner  of  internal 
revenue,  that  the  same  contains  a  true  and  faithful 
account  of  the  taxes  as  aforesaid.  And  for  any  default 
in  the  making  or  rendering  of  such  list  or  return,  with  such 
declaration  annexed,  the  bank,  trust  company,  savings 
institution,  or  insurance  company  making  such  default, 
shall  forfeit  as  a  penalty  the  sum  of  one  thousand  dollars; 
and  in  case  of  any  default  in  making  or  rendering  said 
list  or  return,  or  of  any  default  in  the  payment  of  the  tax 
as  required,  or  any  part  thereof,  the  assessment  and  col- 
lection of  the  tax  and  penalty  shall  be  in  accordance  wilh 
the  general  provisions  of  the  law  in  other  cases  of  neglect 
and  refusal:  Provided,  That  the  tax  upon  the  dividends 
of  life  insurance  companies  shall  not  be  deemed  due  until 
such  dividends  are  payable;  nor  shall  the  portion  of 
premiums  returned  by  mutual  life  insurance  companies 


fedi:ral  income  tax  acts  231 

to  their  policy-holders,  nor  the  annual  or  semi-annual 
interest  allowed  or  paid  to  the  depositors  in  savings  banks 
or  savings  institutions  be  considered  as  dividends. 

That  section  one  hundred  and  twenty-two  be  amended 
by  striking  out  all  after  the  enacting  clause  and  inserting 
in  lieu  thereof  the  following:  That  any  railroad,  canal, 
turnpike,  canal  navigation,  or  slack-water  company,  in- 
debted for  any  money  for  which  bonds  or  other  evidence 
of  indebtedness  have  been  issued,  payable  in  one  or  more 
years  after  date,  upon  which  interest  is  stipulated  to  be 
paid,  or  coupons  representing  the  interest,  or  any  such 
company  that  may  have  declared  any  dividend  in  scrip  or 
money  due  or  payable  to  its  stockholders,  including  non- 
residents, whether  citizens  or  aliens,  as  part  of  the  earn- 
ings, profits,  income,  or  gains  of  such  company,  and  all 
profits  of  such  company  carried  to  the  account  of  any 
fund,  or  used  for  construction,  shall  be  subject  to  and  pay 
a  tax  of  five  per  centum  on  the  amount  of  all  such  interest, 
or  coupons,  dividends,  or  profits,  whenever  and  wherever 
the  same  shall  be  payable,  and  to  whatsoever  party  or 
person  the  same  may  be  payable,  including  non-residents, 
whether  citizens  or  aliens  and  said  companies  are  hereby 
authorized  to  deduct  and  withhold  from  all  payments  on 
account  of  any  interest,  or  coupons,  and  dividends,  due 
and  payable  as  aforesaid,  the  tax  of  five  per  centum;  and 
the  payment  of  the  amount  of  said  tax  so  deducted  from 
the  interest,  or  coupons,  or  dividends,  and  certified  by  the 
president  or  treasurer  of  said  company,  shall  discharge 
said  company  from  that  amount  of  the  dividend,  or  in- 
terest, or  coupon  on  the  bonds  or  other  evidence  of  their 
indebtedness  so  held  by  any  person  or  party  whatever,  ex- 
cept where  said  companies  may  have  contracted  otherwise. 
And  a  list  or  return  shall  be  made  and  rendered  to  the  as- 
sessor, or  assistant  assessor,  on  or  before  the  tenth  day  of 
the  month  following  that  in  which  said  interest,  coupons, 
or  dividends  become  due  and  payable,  and  as  often  as  every 
six  months ;  and  said  list  or  return  shall  contain  a  true  and 


232  APPENDIX  [Act,  July  13,  1866 

faithful  account  of  the  amount  of  tax,  and  there  shall  be 
annexed  thereto  a  declaration  of  the  president  or  treasurer 
of  the  company,  under  oath  or  affirmation  in  form  and 
manner  as  may  be  prescribed  by  the  commissioner  of  in- 
ternal revenue,  that  the  same  contains  a  true  and  faithful 
account  of  said  tax.  And  for  any  default  in  making  or 
rendering  such  list  or  return,  with  the  declaration  an- 
nexed, or  of  the  payment  of  the  tax  as  aforesaid,  the  com- 
pany making  such  default  shall  forfeit  as  a  penalty  the 
sum  of  one  thousand  dollars;  and  in  case  of  any  default 
in  making  or  rendering  said  list  or  return,  or  of  the  pay- 
ment of  the  tax  or  any  part  thereof,  as  aforesaid,  the  assess- 
ment and  collection  of  the  tax  and  penalty  shall  be  made, 
according  to  the  provisions  of  law  in  other  cases  of  neglect 
or  refusal. 

That  section  one  hundred  and  twenty-two  be  further 
amended  by  adding  thereto  the  following  proviso:  Pro- 
vided, That  whenever  any  of  the  companies  mentioned  in 
this  section  shall  be  unable  to  pay  the  interest  on  their  in- 
debtedness, and  shall  in  fact  fail  to  pay  such  interest,  that 
in  such  cases  the  tax  levied  by  this  section  shall  not  be 
paid  to  the  United  States  until  said  company  resume  the 
payment  of  interest  on  their  indebtedness. 

That  section  one  hundred  and  twenty-three  be  amended 
by  striking  out  all  after  the  enacting  clause  and  inserting 
in  lieu  thereof  the  following:  That  there  shall  be  levied, 
collected,  and  paid  on  all  salaries  of  officers,  or  payments 
for  services  to  persons  in  the  civil,  military,  naval,  or  other 
employment  or  service  of  the  United  States,  including 
senators  and  representatives  and  delegates  in  Congress, 
when  exceeding  the  rate  of  six  hundred  dollars  per  annum, 
a  tax  of  five  per  centum  on  the  excess  above  the  said  six 
hundred  dollars,  and  a  tax  of  ten  per  centum  on  the  excess 
over  five  thousand  dollars;  and  it  shall  be  the  duty  of  all 
paymasters  and  all  disbursing  officers,  under  the  govern- 
ment of  the  United  States,  or  persons  in  the  employ  thereof 
when  making  any  payment  to  any  officers  or  persons  as 


FEDERAL  INCOME  TAX  ACTS  233 

aforesaid,  or  upon  settling  and  adjusting  the  accounts  of 
such  officers  or  persons,  to  deduct  and  withhold  the  afore- 
said tax,  and  they  shall,  at  the  same  time,  make  a  certifi- 
cate stating  the  name  of  the  officer  or  person  -from  whom 
such  deduction  was  made,  and  the  amount  thereof,  which 
shall  be  transmitted  to  the  office  of  the  commissioner  of 
internal  revenue,  and  entered  as  a  part  of  the  internal 
tax;  and  the  pay-roll,  receipts,  or  account  of  officers  or 
persons  paying  such  tax,  as  aforesaid,  shall  be  made  to 
exhibit  the  fact  of  such  payment.  And  it  shall  be  the  duty 
of  the  several  auditors  of  the  Treasury  Department,  when 
auditing  the  accounts  of  any  paymaster  or  disbursing 
officer,  or  any  officer  withholding  his  salary  from  moneys 
received  by  him,  or  when  settling  or  adjusting  the  accounts 
of  any  such  officer,  to  require  evidence  that  the  taxes  men- 
tioned in  this  section  have  been  deducted  and  paid  over 
to  the  commissioner  of  internal  revenue  or  other  officer 
authorized  to  receive  the  same:  Provided,  That  payments 
of  prize  money  shall  be  regarded  as  income  from  salaries, 
and  the  tax  thereon  shall  be  adjusted  and  collected  in 
like  manner:  Provided,  further,  That  this  section  shall  not 
apply  to  payments  made  to  mechanics  or  laborers  em- 
ployed upon  public  works. 


That  an  act  entitled  "An  act  to  declare  the  meaning  of 
certain  parts  of  the  internal  revenue  act  approved  June 
thirty,  eighteen  hundred  and  sixty-four,  and  for  other 
purposes,"  approved  March  tenth,  eighteen  hundred  and 
sixty-six,  be  amended  by  striking  out  sections  three,  four, 
and  five  of  said  act,  and  inserting  in  Ueu  thereof  the  follow- 
ing :  That  it  shall  be  the  duty  of  all  persons  required  to  make 
returns  or  lists  of  income  or  articles  or  objects  charged  with 
an  internal  tax,  to  declare  in  such  returns  or  lists  whether 
the  several  rates  and  amounts  therein  contained  are  stated 
according  to  their  values  in  legal  tender  currency  or  accord- 
ing to  their  values  in  coined  money;  and  in  case  of  neglect 


234  APPENDIX  [Act,  July  13,  1866 

or  refusal  so  to  declare  to  the  satisfaction  of  the  assistant  as- 
sessor receiving  such  returns  or  lists,  such  assistant  assessor 
is  hereby  required  to  make  returns  or  lists  for  such  persons 
so  neglecting  or  refusing,  as  in  cases  of  persons  neglecting 
or  refusing  to  make  the  returns  or  hsts  required  by  the 
acts  aforesaid,  and  to  assess  the  tax  thereon,  and  to 
add  thereto  the  amount  of  penalties  imposed  by  law 
in  cases  of  such  neglect  or  refusal.  And  whenever  the 
rates  and  amounts  contained  in  the  returns  or  lists  as  afore- 
said shall  be  stated  in  coined  money,  it  shall  be  the  duty  of 
each  assessor  receiving  the  same  to  reduce  such  rates  and 
amounts  to  their  equivalent  in  legal  tender  currency,  ac- 
cording to  the  value  of  such  coined  money  in  said  cur- 
rency for  the  time  covered  by  said  returns.  And  the 
lists  required  by  law  to  be  furnished  to  collectors  by  as- 
sessors shall  in  all  cases  contain  the  several  amounts  of 
taxes  assessed,  estimated,  or  valued  in  legal  tender  cur- 
rency only. 


ACT  OF  MARCH  2,  1867  * 

Chapter  CLXIX. — An  Act  to  amend  existing  Laws  relating 
to  Internal  Revenue,  and  for  other  Purposes 


Sec.  13.  And  be  it  further  enacted,  That  the  act  entitled 
''An  act  to  provide  internal  revenue  to  support  the  gov- 
ernment, to  pay  interest  on  the  public  debt,  and  for  other 
purposes,"  approved  June  thirty,  eighteen  hundred  and 
sixty-four,  and  as  subsequently  amended,  be  further 
amended  as  follows,  namely: — 

Income. — That  section  one  hundred  and  sixteen  be 
amended  by  striking  out  all  after  the  enacting  clause  and 
inserting,  in  lieu  thereof,  as  follows:  That  there  shall  be 
levied,  collected,  and  paid  annually  upon  the  gains,  profits, 
and  income  of  every  person  residing  in  the  United  States, 
or  of  any  citizen  of  the  United  States  residing  abroad 
whether  derived  from  any  kind  of  property,  rents,  interest, 
dividends,  or  salaries,  or  from  any  profession,  trade, 
employment,  or  vocation,  carried  on  in  the  United  States, 
or  elsewhere,  or  from  any  other  source  whatever,  a  tax 
of  five  per  centum  on  the  amount  so  derived  over  one 
thousand  dollars,  and  a  like  tax  shall  be  levied,  collected, 
and  paid  annually  upon  the  gains,  profits,  and  income  of 
every  business,  trade,  or  profession  carried  on  in  the  United 
States,  by  persons  residing  without  the  United  States,  and 
not  citizens  thereof.  And  the  tax  herein  provided  for 
shall  be  assessed,  collected,  and  paid  upon  the  gains,  profits 
arid  income  for  the  year  ending  the  thirty-first  day  of  De- 
cember next  preceding  the  time  for  levying,  collecting,  and 
paying  said  tax. 

1 14  U.  S.  Stat,  at  Large,  471. 
235 


236  APPENDIX  [Act,  Mch.  2,  1867 

That  section  one  hundred  and  seventeen  be  amended  by 
striking  out  all  after  the  enacting  clause  and  inserting  in 
lieu  thereof,  the  following:  That,  in  estimating  the  gains, 
profits,  and  income  of  any  person,  there  shall  be  included 
all  income  derived  from  interest  upon  notes,  bonds,  and 
other  securities  of  the  United  States;  profits  realized  within 
the  year  from  sales  of  real  estate  purchased  within  the 
year  or  within  two  years  previous  to  the  year  for  which 
income  was  (is)  estimated;  interest  received  or  accrued 
upon  old  (all)  notes,  bonds,  and  mortgages,  or  other 
forms  of  indebtedness  bearing  interest,  whether  paid  or 
not,  if  good  and  collectible,  less  the  interest  which  has 
become  due  from  said  person  during  the  year;  the  amount 
of  all  premium  on  gold  and  coupons;  the  amount  of  sales 
of  live  stock,  sugar,  wool,  butter,  che(e)se,  pork,  beef, 
mutton,  or  other  meats,  hay  and  grain,  or  other  vegetable 
or  other  productions,  being  the  growth  or  produce  of  the 
estate  of  such  person,  not  including  any  part  thereof  con- 
sumed directly  by  the  family;  all  other  gains,  profits,  and 
income  derived  from  any  source  whatever,  except  the 
rental  value  of  any  homestead  used  or  occupied  by  any 
person  or  by  his  family  in  his  own  right,  or  in  the  right  of 
his  wife;  and  the  share  of  any  person  of  the  gains  and  prof- 
its of  all  companies,  whether  incorporated  or  partnership, 
who  would  be  entitled  to  the  same,  if  divided,  whether 
divide(^  or  otherwise,  except  the  amount  of  income  received 
from  institutions  or  corporations  whose  officers,  as  required 
by  law,  withhold  a  per  centum  of  the  dividends  made  by 
such  institutions,  and  pay  the  same  to  the  officer  author- 
ized to  receive  the  same;  and  except  that  portion  of  the 
salary  or  pay  received  for  services  in  the  civil,  military, 
naval,  or  other  service  of  the  United  States,  including 
senators,  representatives,  and  delegates  in  Congress, 
from  which  the  tax  has  been  deducted.  And  in  addition 
to  one  thousand  dollars  exempt  from  income  tax,  as  here- 
inbefore provided,  all  national,  state,  county,  and  munici- 
pal taxes  paid  within  the  year  shall  be  deducted  from  the 


FEDERAL  INCOME  TAX  ACTS  237 

gains,  profits,  or  income,  of  the  person  who  has  actually 
paid  the  same,  whether  such  person  be  owner,  tenant, 
or  mortgagor;  losses  actually  sustained  during  the  year 
arising  from  fires,  shipwreck,  or  incurred  in  trade  and 
debts  ascertained  to  be  worthless,  but  excluding  all  esti- 
mated depreciation  of  values  and  losses  within  the  year 
on  sales  of  real  estate  purchased  two  years  previous  to 
the  year  for  which  income  is  estimated;  the  amount 
actually  paid  for  labor  or  interest  by  any  person  who 
rents  lands  or  hires  labor  to  cultivate  land,  or  who  con- 
ducts any  other  business  from  which  income  is  actually 
derived;  the  amounts  actually  paid  by  any  person  for  the 
rent  of  the  house  or  premises  occupied  as  a  residence  for 
himself  or  his  family;  the  amount  paid  out  for  usual  or 
ordinary  repairs:  Provided,  That  no  deduction  shall  be 
made  for  any  amount  paid  out  for  new  buildings,  per- 
manent improvements  or  betterments,  made  to  increase 
the  value  of  any  property  or  estate:  And  provided,  further. 
That  only  one  deduction  of  one  thousand  dollars  shall  be 
made  from  the  aggregate  income  of  all  the  members  of 
any  family,  composed  of  one  or  both  parents,  and  one 
or  more  minor  children,  or  husband  and  wife;  that  guard- 
ians shall  be  allowed  to  make  such  deduction  in  favor  of 
each  and  every  ward,  except  that  in  case  where  two  or 
more  wards  are  comprised  in  one  family,  and  have  joint 
property  interest,  only  one  deduction  shall  be  made  in 
their  favor :  And  provided,  further.  That  in  cases  where  the 
salary  or  other  compensation  paid  to  any  person  in  the 
employment  or  service  of  the  United  States  shall  not 
exceed  the  rate  of  one  thousand  dollars  per  annum,  or 
shall  be  by  fees,  or  uncertain  or  irregular  in  the  amount 
or  in  the  time  during  which  the  same  shall  have  accrued 
or  been  earned,  such  salary  or  other  compensation  shall 
be  included  in  estimating  the  annual  gains,  profits,  or 
income  of  the  person  to  whom  the  same  shall  have  been 
paid.    ' 

That  section  one  hundred  and  eighteen  be  amended 


238  APPENDIX  [Act,  Mch.  2,  1867 

by  striking  out  all  after  the  enacting  clause  and  in- 
serting, in  lieu  thereof,  the  following:  That  it  shall  be 
the  duty  of  all  persons  of  lawful  age  to  make  and  render 
a  list  or  return,  on  or  before  the  day  prescribed  by  law, 
in  such  form  and  manner  as  may  be  prescribed  by  the 
commissioner  of  internal  revenue,  to  the  assistant  asses- 
sor of  the  district  in  which  they  reside,  of  the  amount 
of  their  income,  gains,  and  profits,  as  aforesaid;  and  all 
guardians  and  trustees,  executors,  and  administrators, 
or  any  person  acting  in  any  other  fiduciary  capacity, 
shall  make  and  render  a  list  or  return,  as  aforesaid,  to 
the  assistant  assessor  of  the  district  in  which  such  person 
acting  in  a  fiduciary  capacity  resides,  of  the  amount  of 
income,  gains,  and  profits  of  any  minor  or  person  for 
whom  they  act,  and  the  assistant  assessor  shall  require 
every  list  or  return  to  be  verified  by  the  oath  or  affirma- 
tion of  the  party  rendering  it,  and  may  increase  the  amount 
of  any  list  or  return,  if  he  has  reason  to  believe  that  the 
same  is  understated;  and  in  case  any  such  person  shall 
neglect  or  refuse  to  make  and  render  such  list  or  return, 
or  shall  render  a  false  or  fraudulent  list  or  return,  it  shall 
be  the  duty  of  the  assessor  or  assistant  assessor  to  make 
such  list,  according  to  the  best  information  he  can  ob- 
tain, by  the  examination  of  such  person,  or  his  books  or 
accounts,  or  any  other  evidence,  and  to  add  fifty  per 
centum  as  a  penalty  to  the  amount  of  the  tax  due  on  such 
list  in  all  cases  of  wilful  neglect  or  refusal  to  make  and 
render  a  list  or  return;  and,  in  all  cases  of  a  false  or  fraud- 
ulent list  or  retiun  having  been  rendered,  to  add  one  hun- 
dred per  centum,  as  a  penalty,  to  the  amount  of  tax  ascer- 
tained to  be  due,  the  tax  and  the  additions  thereto  as  a 
penalty  to  be  assessed  and  collected  in  the  manner  pro- 
vided for  in  other  cases  of  wilful  neglect  or  refusal  to 
render  a  list  or  return,  or  of  rendering  a  false  and  fraudu- 
lent return :  Provided,  That  any  party,  in  his  or  her  own  be- 
half, or  as  such  fiduciary,  shall  be  permitted  to  declare, 
under  oath  or  affirmation,  the  form  and  manner  of  which 


FEDERAL  INCOME  TAX  ACTS  239 

shall  be  prescribed  by  the  Commissioner  of  Internal  Reve- 
nue, that  he  or  she,  or  his  or  her  ward  or  beneficiary,  was 
not  possessed  of  an  income  of  one  thousand  dollars,  Uable 
to  be  assessed  according  to  the  provisions  of  this  act; 
or  may  declare  that  he  or  she  has  been  assessed  and  paid 
an  income  tax  elsewhere  in  the  same  year,  under  authority 
of  the  United  States,  upon  his  or  her  income,  gains,  and 
profits,  as  prescribed  by  law;  and  if  the  assistant  assessor 
shall  be  satisfied  of  the  truth  of  the  declaration,  shall 
thereupon  be  exempt  from  income  tax  in  the  said  district; 
or  if  the  list  or  return  of  any  party  shall  have  been  in- 
creased by  the  assistant  assessor,  such  party  may  exhibit 
his  books  and  accounts,  and  be  permitted  to  prove  and 
declare,  under  oath  or  affirmation,  the  amount  of  income 
liable  to  be  assessed;  but  such  oaths  and  evidence  shall 
not  be  considered  as  conclusive  of  the  facts,  and  no  de- 
duction claimed  in  such  cases  shall  be  made  or  allowed 
until  approved  by  the  assistant  assessor.  Any  person 
feeling  aggrieved  by  the  decision  of  the  assistant  assessor 
in  such  cases  may  appeal  to  the  assessor  of  the  district, 
and  his  decision  thereon,  unless  reversed  by  the  com- 
missioner of  internal  revenue,  shall  be  final,  and  the 
form,  time,  and  manner  of  proceedings  shall  be  subject 
to  rules  and  regulations  to  be  prescribed  by  the  commis- 
sioner of  internal  revenue:  Provided,  further,  That  no 
penalty  shall  be  assessed  upon  any  person  for  such  neg- 
lect or  refusal,  or  for  making  or  rendering  a  false  or  fraud- 
ulent return,  except  after  reasonable  notice  of  the  time 
and  place  of  hearing,  to  be  regulated  by  the  commissioner 
of  internal  revenue,  so  as  to  give  the  person  charged  an 
opportunity  to  be  heard. 

That  section  one  hundred  and  nineteen  be  amended  by 
striking  out  all  after  the  enacting  clause  and  inserting, 
in  lieu  thereof,  the  following:  That  the  taxes  on  incomes 
herein  imposed  shall  be  levied  on  the  first  day  of  March, 
and  be  due  and  payable  on  or  before  the  thirtieth  day  of 
April,  in  each  year,  until  and  including  the  year  eighteen 


240  APPENDIX  [Act,  Mch.  2,  1867 

hundred  and  seventy,  and  no  longer;  and  to  any  sum  or 
sums  annually  due  and  unpaid  after  the  t[h]irtieth  of  April, 
as  aforesaid,  and  for  ten  days  after  notice  and  demand 
thereof  by  the  collector,  there  shall  be  levied  in  addition 
thereto  the  sum  of  five  per  centum  on  the  amount  of  taxes 
unpaid  and  interest  at  the  rate  of  one  per  centum  per 
month,  upon  said  tax  from  the  time  the  same  became  due, 
as  a  penalty,  except  from  the  estates  of  deceased,  insane,  or 
insolvent  persons:  Provided,  That  the  tax  on  incomes  for 
the  year  eighteen  hundred  and  sixty-six  shall  be  levied 
on  the  day  this  takes  effect. 

That  section  one  hundred  and  twenty-three  be  amended 
by  striking  out  all  after  the  enacting  clause  and  inserting, 
in  Ueu  thereof,  the  following:  That  there  shall  be  levied, 
collected,  and  paid  on  all  salaries  of  officers,  or  payments 
for  services  to  persons  in  the  civil,  military,  naval  or  other 
employment  or  service  of  the  United  States,  including 
senators  and  representatives  and  delegates  in  Congress, 
when  exceeding  the  rate  of  one  thousand  dollars  per 
annum,  a  tax  of  five  per  centum  on  the  excess  above  the 
said  one  thousand  dollars;  and  it  shall  be  the  duty  of  all 
paymasters  and  all  disbursing  officers,  under  the  govern- 
ment of  the  United  States,  or  persons  in  the  employ 
thereof,  when  making  any  payment  to  any  officers  or 
persons  as  aforesaid,  whose  compensation  is  determined 
by  a  fixed  salary,  or  upon  settling  or  adjusting  the  accounts 
of  such  officers  or  persons  to  deduct  and  withhold  the 
aforesaid  tax  of  five  per  centum;  and  the  pay-roll,  receipts, 
or  account  of  officers  or'  persons  paying  such  tax  as  afore- 
said shall  be  made  to  exhibit  the  fact  of  such  payment. 
And  it  shall  be  the  duty  of  the  accounting  officers  of  the 
Treasury  Department,  when  auditing  the  accounts  of 
any  paymaster  or  disbursing  officer,  or  any  officer  with- 
holding his  salary  from  moneys  received  by  him,  or  when 
settling  or  adjusting  the  accounts  of  any  such  officer,  to 
require  evidence  that  the  taxes  mentioned  in  this  section 
have  been  deducted  and  paid  over  to  the  Treasurer  of  the 


FEDERAL  INCOME  TAX  ACTS  241 

United  States,  or  other  officer  authorized  to  receive  the 
same:  Provided,  That  payments  of  prize  money  shall  be 
regarded  as  income  from  salaries,  and  the  tax  thereon  shall 
be  adjusted  and  collected  in  like  manner;  Provided,  further, 
That  this  section  shall  not  apply  to  payments  made  to 
mechanics  or  laborers  employed  upon  public  works: 
And  provided,  further,  That  in  case  it  should  become 
necessary  for  showing  the  true  receipts  of  the  government 
under  the  operations  of  this  section  upon  the  books  of  the 
Treasury  Department,  the  requisite  amount  may  be 
carried  from  unappropriated  moneys  in  the  treasury  to 
the  credit  of  said  account;  and  this  section  shall  take  effect 
upon  salary  and  compensation  for  the  month  of  March, 
eighteen  hundred  and  sixty-seven. 


ACT  OF  JULY   14,   1870.  ^ 

Chap.  CCLV. — An  Act  to  reduce  internal  Taxes,  and  for 
other  Purposes 


Sec.  6.  And  be  it  further  enacted,  That  there  shall  be 
levied,  and  collected  annually,  as  hereinafter  provided, 
for  the  years  eighteen  hundred  and  seventy  and  eighteen 
hundred  and  seventy-one,  and  no  longer,  a  tax  of  two 
and  one  half  per  centum  upon  the  gains,  profits,  and  in- 
come of  every  person  residing  in  the  United  States,  and 
of  every  citizen  of  the  United  States  residing  abroad, 
derived  from  any  source  whatever,  whether  within  or 
without  the  United  States,  except  as  hereafter  provided, 
and  a  like  tax  annually  upon  the  gains,  profits,  and  in- 
come derived  from  any  business,  trade  or  profession 
carried  on  in  the  United  States  by  any  person  residing 
without  the  United  States,  and  not  a  citizen  thereof,  or 
from,  rents  of  real  estate  within  the  United  States  owned 
by  any  person  residing  without  the  United  States,  and 
not  a  citizen  thereof. 

Sec.  7.  And  be  it  further  enacted.  That  in  estimating 
the  gains,  profits,  and  income  of  any  person,  there  shall 
be  included  all  income  derived  from  any  kind  of  property, 
rents,  interest  received  or  accrued  upon  all  notes,  bonds, 
and  mortgages,  or  other  forms  of  indebtedness  bearing 
interest,  whether  paid  or  not,  if  good  and  collectible, 
interest  upon  notes,  bonds,  or  other  securities  of  the 
United  States;  and  the  amount  of  all  premium  on  gold  and 
coupons;  the  gains,  profits,  and  income  of  any  business, 
profession,  trade,  employment,   office,   or  vocation;  in- 

1 16  U.  S.  Stat,  at  Large,  256. 
242 


FEDERAL  INCOME  TAX  ACTS  243 

eluding  any  amount  received  as  salary  or  pay  for  services 
in  the  civil,  military,  naval,  or  other  service  of  the  United 
States,  or  as  senator,  representative,  or  delegate  in  Con- 
gress; except  that  portion  thereof  from  which,  under 
authority  of  acts  of  Congress  previous  hereto,  a  tax  of 
five  per  centum  shall  have  been  withheld;  the  share  of 
any  person  of  the  gains  and  profits,  whether  divided  or 
not,  of  all  companies  or  partnerships,  but  not  including 
the  amount  received  from  any  corporations  whose  officers, 
as  authorized  by  law,  withhold  and  pay  as  taxes  a  per 
centum  of  the  dividends  made,  and  of  interest  or  coupons 
paid  by  such  corporations;  profits  realized  within  the  year 
from  sales  of  real  estate  purchased  within  two  years 
previous  to  the  year  for  which  income  is  estimated; 
the  amount  of  sales  of  live  stock,  sugar,  wool,  butter, 
cheese,  pork,  beef,  mutton,  or  other  meats,  hay  or  grain, 
fruits,  vegetables,  or  other  productions,  being  the  growth 
or  produce  of  the  estate  of  such  person,  but  not  including 
any  part  thereof  consumed  directly  by  the  family;  and  all 
other  gains,  profits,  and  income  drawn  from  any  source 
whatever,  but  not  including  the  rental  value  of  the  home- 
stead used  or  occupied  by  any  person,  of  by  his  family. 

Sec.  8.  And  he  it  further  enacted,  That  mihtary  or  naval 
pensions  allowed  to  any  person  under  the  laws  of  the 
United  States,  and  the  sum  of  two  thousand  dollars  of 
the  gains,  profits,  and  income  of  any  persons,  shall  be 
exempt  from  said  income  tax,  in  the  manner  hereinafter 
provided.  Only  one  deduction  of  two  thousand  dollars 
shall  be  made  from  the  aggregate  income  of  all  the  mem- 
bers of  any  family  composed  of  one  or  both  parents  and  one 
or  more  minor  children,  or  of  husband  and  wife;  but  when 
a  wife  has  by  law  a  separate  income,  beyond  the  control 
of  her  husband,  and  is  living  separate  and  apart  from  him, 
such  deduction  shall  then  be  made  from  her  income, 
gains,  and  profits;  and  guardians  and  trustees  shall  be 
allowed  to  make  the  deduction  in  favor  of  each  ward  or 


244  APPENDIX  [Act,  July  14,  1870 

beneficiary  except  that  in  a  case  of  two  or  more  wards 
or  beneficiaries  comprised  in  one  family,  having  joint 
property  interest,  only  one  deduction  shall  be  made  in 
their  favor.  For  the  purpose  of  allowing  said  deduction 
from  the  income  of  any  religious  or  social  community 
holding  all  their  property  and  the  income  therefrom  jointly 
and  in  common,  each  five  of  the  persons  composing  such 
society,  and  any  remaining  fractional  number  of  such 
persons  less  than  five,  over  such  groups  of  five,  shall  be 
held  to  constitute  a  family,  and  a  deduction  of  two  thou- 
sand dollars  shall  be  allowed  for  each  of  said  families.  Any 
taxes  on  the  incomes,  gains,  and  profits,  of  such  societies 
now  due  and  unpaid,  shall  be  assessed  and  collected  ac- 
cording to  tliis  provision,  except  that  the  deduction  shall 
be  only  one  thousand  dollars  for  any  year  prior  to  eighteen 
hundred  and  seventy. 

Sec.  9.  Ajid  he  it  further  enacted,  That  in  addition  to 
the  exemptions  provided  in  the  preceding  section,  there 
shall  be  deducted  from  the  gains,  profits,  and  income  of 
any  person  all  national,  state,  county,  and  municipal 
taxes  paid  by  him  within  the  year,  whether  such  person 
be  owner,  tenant,  or  mortgager;  all  his  losses  actually 
sustained  during  the  year  arising  from  fires,  floods,  ship- 
wreck, or  incurred  in  trade,  and  debts  ascertained  to  be 
worthless,  but  excluding  all  estimated  depreciation  of 
values;  the  amount  of  interest  paid  during  the  year,  and 
the  amount  paid  for  rent  or  labor  to  cultivate  land,  or  to 
conduct  any  other  business  from  which  income  is  derived; 
the  amount  paid  for  the  rent  of  the  house  or  premises 
occupied  as  a  residence  for  himself  or  his  family,  and  the 
amount  paid  out  for  usual  and  ordinary  repairs.  No  de- 
duction shall  be  made  for  any  amount  paid  out  for  new 
buildings,  permanent  improvements,  or  betterments  made 
to  increase  the  value  of  any  property  or  estate. 

Sec.  10.  And  he  it  further  enacted,  That  the  tax  herein- 
before provided  shall  be  assessed  upon  the  gains,  profits, 


FEDERAL  INCOME  TAX  ACTS  245 

and  income  for  the  year  ending  on  the  thirty-first  day  of 
December  next  preceding  the  time  for  levying  and  col- 
lecting said  tax,  and  shall  be  levied  on  the  first  day  of 
March,  eighteen  hundred  and  seventy-one,  and  eighteen 
hundred  and  seventy-two,  and  be  due  and  payable  on  or 
before  the  thirtieth  day  of  April  in  each  of  said  years. 
And  in  addition  to  any  sum  annually  due  and  unpaid 
after  the  thirtieth  day  of  April,  and  for  ten  days  after 
notice  and  demand  thereof  by  the  collector,  there  shall 
be  levied  and  collected,  as  a  penalty,  the  sum  of  five  per 
centum  on  the  amount  unpaid,  and  interest  on  said  amount 
at  the  rate  of  one  per  centum  per  month  from  the  time  the 
same  became  due,  except  from  the  estates  of  deceased, 
insane,  or  insolvent  persons. 

Sec.  11.  And  he  it  further  enacted,  That  it  shall  be  the 
duty  of  every  person  of  lawful  age,  whose  gross  income 
during  the  preceding  year  exceeded  two  thousand  dollars, 
to  make  and  render  a  return  on  or  before  the  day  desig- 
nated by  law,  to  the  assistant  assessor  of  the  district  in 
which  he  resides,  of  the  gross  amount  of  his  income,  gains, 
and  profits  as  aforesaid;  but  not  including  the  amount 
received  from  any  corporation  whose  officers,  as  au- 
thorized by  law,  withhold  and  pay  as  taxes  a  per  centum 
of  the  dividends  made  and  of  the  interest  or  coupons  paid 
by  such  corporation,  nor  that  portion  of  the  salary  or  pay 
received  for  services,  in  the  civil,  military,  naval,  or  other 
service  of  the  United  States,  or  as  senator,  representative, 
or  delegate  in  Congress,  from  which  tax  has  been  deducted, 
nor  the  wages  of  minor  children  not  received;  and  every 
guardian  and  trustee,  executor  or  administrator,  and  any 
person  acting  in  any  other  fiduciary  capacity,  or  as  resi- 
dent agent  for,  or  copartner  of,  any  non-resident  alien, 
deriving  income,  gains,  and  profits  from  any  business, 
trade,  or  profession  carried  on  in  the  United  States,  or 
from  rents  of  real  estate  situated  therein,  shall  make  and 
render  a  return  as  aforesaid  to  the  assistant  assessor  of  the 


246  APPENDIX  [Act,  July  14,  1870 

district  in  which  he  resides  of  the  amount  of  income, 
gains,  and  profits  of  any  minor  or  person  for  whom  he 
acts.  The  assistant  assessor  shall  require  every  such 
return  to  be  verified  by  the  oath  of  the  party  rendering 
it,  and  may  increase  the  amount  of  any  return,  after  notice 
to  such  party,  if  he  has  reason  to  believe  that  the  same  is 
understated.  In  case  any  person  having  a  gross  income 
as  above,  of  two  thousand  dollars  or  more,  shall  neglect 
or  refuse  to  make  and  render  such  return,  or  shall  render  a 
false  or  fraudulent  return,  the  assessor  or  the  assistant 
assessor  shall  make  such  return,  according  to  the  best 
information  he  can  obtain  by  the  examination  of  said  per- 
son or  of  his  books  or  accounts  or  by  any  other  evidence, 
and  shall  add,  as  a  penalty,  to  the  amount  of  the  tax  due 
thereon,  fifty  per  centum  in  all  cases  of  willful  neglect 
or  refusal  to  make  and  render  a  return,  and  one  hundred 
per  centum  in  all  cases  of  a  false  or  fraudulent  return 
having  been  rendered.  The  tax  and  the  addition  thereto 
as  penalty  shall  be  assessed  and  collected  in  the  manner 
provided  for  in  cases  of  willful  neglect  or  refusal  to  render 
a  return,  or  of  rendering  a  false  or  fraudulent  return.  But 
no  penalty  shall  be  assessed  upon  any  person  for  such 
neglect  or  refusal,  or  for  making  or  rendering  a  false  or 
fraudulent  return,  except  after  reasonable  notice  of  the 
time  and  place  of  hearing,  to  be  regulated  by  the  commis- 
sioner of  internal  revenue,  so  as  to  give  the  person  charged 
an  opportunity  to  be  heard:  Provided,  That  no  collector, 
deputy  collector,  assessor,  or  assistant  assessor  shall  per- 
mit to  be  published  in  any  manner  such  income  returns, 
or  any  part  thereof,  except  such  general  statistics,  not 
specifying  the  names  of  individuals  or  firms,  as  he  may 
make  public,  under  such  rules  and  regulations  as  the  com- 
missioner of  internal  revenue  shall  prescribe. 

Sec.  12.  And  he  it  further  enacted,  That  when  the  re- 
turn of  any  person  is  increased  by  the  assistant  assessor, 
such  person  may  exhibit  his  books  and  accounts  and  be 


I^edeRal  income  tax  acts  ^7 

permitted  to  prove  and  declare,  under  oath,  the  amount 
of  income  liable  to  be  assessed;  but  such  oath  and  evi- 
dence shall  not  be  conclusive  of  the  facts,  and  no  deduc- 
tions claimed  in  such  cases  shall  be  allowed  until  approved 
by  the  assistant  assessor.  Any  person  may  appeal  from 
the  decision  of  the  assistant  assessor,  in  such  cases,  to  the 
assessor  of  the  district,  and  his  decision  thereon,  unless 
reversed  by  the  commissioner  of  internal  revenue,  shall 
be  final.  The  form,  time,  and  manner  of  proceedings 
shall  be  subject  to  regulations  to  be  prescribed  by  the 
commissioner  of  internal  revenue. 

Sec.  13.  And  he  it  further  enacted,  That  any  person  in 
his  own  behalf,  or  as  such  fiduciary  or  agent,  shall  be  per- 
mitted to  declare,  under  oath,  that  he,  or  his  ward,  bene- 
ficiary, or  principal,  was  not  possessed  of  an  income  of 
two  thousand  dollars,  liable  to  be  assessed  according  to 
the  provisions  of  this  act;  or  may  declare  that  an  income 
tax  has  been  assessed  and  paid  elsewhere  in  the  same  year, 
under  authority  of  the  United  States,  upon  his  income, 
gains,  and  profits,  or  those  of  his  ward,  beneficiary,  or 
principal,  as  required  by  law;  and  if  the  assistant  assessor 
shall  be  satisfied  of  the  truth  of  the  declaration,  such  person 
shall  thereupon  be  exempt  from  income  tax  in  the  said 
district. 

Sec.  14.  And  he  it  further  enacted,  That  consuls  of  foreign 
governments  who  are  not  citizens  of  the  United  States 
shall  be  exempt  from  any  income  tax  imposed  by  this 
act  which  may  be  derived  from  their  official  emoluments, 
or  from  property  in  foreign  countries.  Provided,  That  the 
governments  which  such  consuls  may  represent  shall 
extend  similar  exemption  to  consuls  of  the  United  States. 

Sec.  15.  And  he  it  further  enacted,  That  there  shall  be 
levied,  and  collected  for  and  during  the  year  eighteen 
hundred  and  seventy-one  a  tax  of  two  and  one-half  per 


248  APPENDIX  [Act,  July  14,  1870 

centum  on  the  amount  of  all  interest  or  coupons  paid  on 
bonds,  or  other  evidences  of  debt  issued  and  payable  in 
one  or  more  years  after  date,  by  any  of  the  corporations 
in  this  section  hereinafter  enumerated,  and  on  the  amount 
oi  all  dividends  of  earnings,  income,  or  gains,  hereafter 
declared,  by  any  bank,  trust  company,  savings  institution, 
insurance  company,  railroad  company,  canal  company, 
turnpike  company,  canal  navigation  company,  and  slack- 
water  company,  whenever  and  wherever  the  same  shall 
be  payable,  and  to  whatsoever  person  the  same  may  be 
due,  including  non-residents,  whether  citizens  or  aliens, 
and  on  all  undivided  profits  of  any  such  corporation 
which  have  accrued  and  been  earned  and  added  to  any 
surplus,  contingent,  or  other  fimd,  and  every  such  cor- 
poration having  paid  the  tax  as  aforesaid,  is  hereby  au- 
thorized to  deduct  and  withhold  from  any  payment  on 
account  of  interest,  coupons,  and  dividends,  an  amount 
equal  to  the  tax  of  two  and  one-half  per  centum  on  the 
same;  and  the  payment  to  the  United  States,  as  provided 
by  law,  of  the  amount  of  tax  so  deducted  from  the  inter- 
est, coupons,  and  dividends  aforesaid,  shall  discharge  the 
corporation  from  any  liability  for  that  amount  of  said 
interest,  coupons,  or  dividends,  claimed  as  due  to  any 
person,  except  in  cases  where  said  corporations  have  pro- 
vided otherwise  by  an  express  contract :  Provided,  That  the 
tax  upon  the  dividends  of  insurance  companies  shall  not 
be  deemed  due  until  such  dividends  are  payable,  either  in 
money  dt  otherwise;  and  that  the  money  returned  by 
mutual  insurance  companies  to  their  policy-holders, 
and  the  annual  or  semi-annual  interest  allowed  or  paid  to 
the  depositors  in  savings  banks  or  savings  institutions 
shall  not  be  considered  as  dividends;  and  that  when  any 
dividend  is  made,  or  interest  as  aforesaid  is  paid,  which 
includes  any  part  of  the  surplus  or  contingent  fund  of 
any  corporation  which  has  been  assessed  and  the  tax 
paid  thereon,  or  which  includes  any  part  of  the  dividends, 
interest,   or  coupons  received   from  other  corporations 


FEDERAL  INCOME  TAX  ACTS  249 

whose  officers  are  authorized  by  law  to  withhold  a  per 
centum  on  the  same,  the  amount  of  tax  so  paid  on  that 
portion  of  the  surplus  or  contingent  fund,  and  the  amount 
of  tax  which  has  been  withheld  and  paid  on  dividends, 
interest,  or  coupons  so  received,  may  be  deducted  from 
the  tax  on  such  dividend  or  interest. 

Sec.  16.  And  be  it  further  enacted,  That  every  person 
having  the  care  or  management  of  any  corporation  liable 
to  be  taxed  under  the  last  preceding  section,  shall  make  and 
render  to  the  assessor  or  assistant  assessor  of  the  district 
in  which  such  person  has  his  office  for  conducting  the 
business  of  such  corporation,  on  or  before  the  tenth  day 
of  the  month  following  that  in  which  any  dividends  or 
sums  of  money  become  due  or  payable  as  aforesaid,  a  true 
and  complete  return,  in  such  form  as  the  commissioner 
of  internal  revenue  may  prescribe  of  the  amount  of  in- 
come and  profits  and  of  taxes  as  aforesaid;  and  there  shall 
be  annexed  thereto  a  declaration  of  the  president,  cashier, 
or  treasurer  of  the  corporation,  under  oath,  that  the  same 
contains  a  true  and  complete  account  of  the  income  and 
profits  and  of  taxes  as  aforesaid.  And  for  any  default 
in  the  making  or  rendering  of  such  return,  with  such 
declaration  annexed,  the  corporation  so  in  default  shall 
forfeit,  as  a  penalty,  the  sum  of  one  .thousand  dollars;  and 
in  case  of  any  default  in  making  or  rendering  said  return 
or  of  any  default  in  the  payment  of  the  tax  as  required, 
or  of  any  part  thereof,  the  assessment  and  collection  of  the 
tax  and  penalty  shall  be  in  accordance  with  the  general  pro- 
visions of  law  in  other  cases  of  neglect  and  refusal. 

Sec.  17.  And  he  it  further  enacted,  That  sections  one 
hundred  and  twenty,  one  hundred  and  twenty-one,  one 
hundred  and  twenty-two,  and  one  hundred  and  twenty- 
three,  of  the  Act  of  June  thirty,  eighteen  hundred  and 
sixty-four,  entitled  ''An  act  to  provide  internal  revenue 
to  support  the  government,  to  pay  interest  on  the  public 


250  APPENDIX  (Act,  July  H,  1S70 

debt,  and  for  other  purposes,"  as  amended  by  the  Act  of 
July  thirteen,  eighteen  hundred  and  sixty-six,  and  the 
Act  of  March  two,  eighteen  hundred  and  sixty-seven, 
shall  be  construed  to  impose  the  taxes  therein  mentioned 
to  the  first  day  of  August,  eighteen  hundred  and  seventy, 
but  after  that  date  no  fiu'ther  taxes  shall  be  levied  or 
assessed  under  said  sections;  and  all  acts  and  parts  of  acts 
relating  to  the  taxes  herein  repealed,  and  that  all  the  pro- 
visions of  said  acts,  shall  continue  in  full  force  for  levying 
and  collecting  all  taxes  properly  assessed  or  liable  to  be 
assessed,  or  accruing  imder  the  provisions  of  former  acts, 
or  drawbacks,  the  right  to  which  has  already  accrued  or 
which  may  hereafter  accrue  under  said  acts,  and  for 
maintaining  and  continuing  hens,  fines,  penalties,  and 
forfeitures  incurred  under  and  by  virtue  thereof.  And  this 
act  shall  not  be  construed  to  affect  any  act  done,  right 
accrued,  or  penalty  incurred  under  former  acts,  but  every 
such  right  is  hereby  saved.  And  for  carrying  out  and  com- 
pleting all  proceedings  which  have  been  already  com- 
menced or  that  may  be  conomenced  to  enforce  such  fines, 
penalties,  and  forfeitures,  or  criminal  proceedings  under 
said  acts,  and  for  the  punishment  of  crimes  of  which  any 
party  shall  be  or  has  been  found  guilty. 


ACT  OF  AUGUST  27,  1894* 

Chap.  34^.    An  Art  to  rvducc  taxnh'oti,  to  protfidc  revenw 
for  tJii  (/()(•( /•/;///<  /</,  and  for  other  purposes 


Sec.  27.  That  from  and  after  the  first  day  of  January, 
eighteen  hundred  and  ninety-tive,  and  until  the  lirst 
day  of  January,  nineteen  hundnxi,  there  shall  be  assessed, 
levied,  rollooted,  and  paid  annually  upon  the  gains,  jirofits, 
and  iiuoiiu>  received  in  the  prececiing  calendar  vo.n  by 
every  citizen  of  the  United  States,  whether  residing  at 
home  or  abroad,  and  ev(M-v  ihm-simi  n^s'ulini::  (luM-t>'ni.  ^vlltM1^e^ 
said  gains,  profits,  or  iiu-onu^  lu^  ilcu-ivod  from  i\u\  kind 
of  property,  rents,  intoivsi,  dividinuls,  or  salarios,  or  from 
any  profession,  trade,  employment,  or  vocation  carried 
on  in  the  United  States  or  els»nvh(M(\  or  from  nny  other 
source  whatever,  a  tax  of  two  ihm;  coutuin  on  (lie  amounts 
so  derived  over  and  above  four  thousand  dollars,  and  a 
like  tax  shall  be  levied,  collected,  and  i\iid  nnnually  upon 
the  gains,  profits,  and  income  from  all  [)ioi>»m  ( y  owned  and 
of  every  business,  trade,  or  profession  c.Mnird  on  in  the 
United  States  by  persons  residing  without  the  United 
States.  And  the  tax  herein  provided  for  shall  be  assessed, 
by  the  Commissioner  of  Internal  Revenue,  and  collected 
and  paid  upon  the  gains,  profits,  and  income  for  the  year 
ending  the  thirty-first  day  of  December  next  preceding 
the  time  for  levying,  collecting,  and  paying  said  tax. 

Sec.  28.  That  in  estimating  the  gains,  profits,  and 
income  of  any  person  there  shall  be  included  all  income 
derived  from  interest  upon  notes,  bonds,  and  other  se- 

>  28  U.  S.  Stat,  at  Large,  509. 


252  APPENDIX  [Act,  Aug.  27,  1894 

curities,  except  such  bonds  of  the  United  States  the  princi- 
pal and  interest  of  which  are  by  the  law  of  their  issuance 
exempt  from  all  Federal  taxation;  profits  reaUzed  within 
the  year  from  sales  of  real  estate  purchased  within  two 
years  previous  to  the  close  of  the  year  for  which  income 
is  estimated;  interest  received  or  accrued  upon  all  notes, 
bonds,  mortgages,  or  other  forms  of  indebtedness  bearing 
interest,  whether  paid  or  not,  if  good  and  collectible,  less 
the  interest  which  has  become  due  from  said  person  or 
which  has  been  paid  by  him  during  the  year;  the  amount 
of  all  premium  on  bonds,  notes,  or  coupons;  the  amount 
of  sales  of  live  stock,  sugar,  cotton,  wool,  butter,  cheese, 
pork,  beef,  mutton,  or  other  meats,  hay,  and  grain,  or 
other  vegetable  or  other  productions,  being  the  growth 
or  produce  of  the  estate  of  such  person,  less  the  amount 
expended  in  the  purchase  or  production  of  said  stock  or 
produce,  and  not  including  any  part  thereof  consumed 
directly  by  the  family;  money  and  the  value  of  all  personal 
property  acquired  by  gift  or  inheritance;  all  other  gains, 
profits,  and  income  derived  from  any  source  whatever 
except  that  portion  of  the  salary,  compensation,  or  pay 
received  for  services  in  the  civil,  military,  naval,  or  other 
service  of  the  United  States,  including  Senators,  Repre- 
sentatives, and  Delegates  in  Congress,  from  which  the 
tax  has  been  deducted,  and  except  that  portion  of  any 
salary  upon  which  the  employer  is  required  by  law  to 
withhold,  and  does  withhold  the  tax  and  pays  the  same  to 
the  officer  authorized  to  receive  it.  In  computing  in- 
comes the  necessary  expenses  actually  incurred  in  carry- 
ing on  any  business,  occupation,  or  profession  shall  be  de- 
ducted, and  also  all  interest  due  or  paid  within  the  year  by 
such  person  on  existing  indebtedness.  And  all  national. 
State,  county,  school,  and  municipal  taxes,  not  including 
those  assessed  against  local  benefits,  paid  within  the  year 
shall  be  deducted  from  the  gains,  profits,  or  income  of  the 
person  who  has  actually  paid  the  same,  whether  such 
person  be  owner,  tenant,  or  mortgagor;  also  losses  actually 


FEDERAL  INCOME  TAX:  ACTS  253 

sustained  during  the  year  incurred  in  trade  or  arising 
from  fires,  storms,  or  shipwreck,  and  not  compensated 
for  by  insurance  or  otherwise,  and  debts  ascertained  to 
be  worthless,  but  excluding  all  estimated  depreciation  of 
values  and  losses  within  the  year  on  sales  of  real  estate 
purchased  within  two  years  previous  to  the  year  for  which 
income  is  estimated:  Provided,  That  no  deduction  shall 
be  made  for  any  amount  paid  out  for  new  buildings, 
permanent  improvements,  or  betterments,  made  to  in- 
crease the  value  of  any  property  or  estate:  Provided  further, 
That  only  one  deduction  of  four  thousand  dollars  shall 
be  made  from  the  aggregate  income  of  all  the  members 
of  any  family,  composed  of  one  or  both  parents,  and  one 
or  more  minor  children,  or  husband  and  wife;  that  guard- 
ians shall  be  allowed  to  make  a  deduction  in  favor  of  each 
and  every  ward,  except  that  in  case  where  two  or  more 
wards  are  comprised  in  one  family,  and  have  joint  prop- 
erty interests,  the  aggregate  deduction  in  their  favor  shall 
not  exceed  four  thousand  dollars:  And  provided  further, 
That  in  cases  where  the  salary  or  other  compensation 
paid  to  any  person  in  the  employment  or  service  of  the 
United  States  shall  not  exceed  the  rate  of  four  thousand 
dollars  per  annum,  or  shall  be  by  fees,  or  uncertain  or 
irregular  in  the  amount  or  in  the  time  during  which  the 
same  shall  have  accrued  or  been  earned,  such  salary  or 
other  compensation  shall  be  included  in  estimating  the 
annual  gains,  profits,  or  income  of  the  person  to  whom 
the  same  shall  have  been  paid,  and  shall  include  that 
portion  of  any  income  or  salary  upon  which  a  tax  has  not 
been  paid  by  the  employer,  where  the  employer  is  required 
by  law  to  pay  on  the  excess  over  four  thousand  dollars: 
Provided  also.  That  in  computing  the  income  of  any 
person,  corporation,  company,  or  association  there  shall 
not  be  included  the  amount  received  from  any  corporation, 
company,  or  association,  as  dividends  upon  the  stock 
of  such  corporation,  company,  or  association  if  the  tax 
of  two  per  centum  has  been  paid  upon  its  net  profits  by 


254  APPENDIX  [Act,  Aug.  27,  1894 

said  corporation,  company,  or  association  as  required  by 
this  Act. 

Sec.  29.  That  it  shall  be  the  duty  of  all  persons  of 
lawful  age  having  an  income  of  more  than  three  thousand 
five  hundred  dollars  for  the  taxable  year,  computed  on 
the  basis  herein  prescribed,  to  make  and  render  a  list  or 
return,  on  or  before  the  day  provided  by  law,  in  such 
form  and  manner  as  may  be  directed  by  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary  of 
the  Treasury,  to  the  collector  or  a  deputy  collector  of  the 
district  in  which  they  reside,  of  the  amount  of  their  in- 
come, gains,  and  profits,  as  aforesaid;  and  all  guardians 
and  trustees,  executors,  administrators,  agents,  receivers, 
and  all  persons  or  corporations  acting  in  any  fiduciary 
capacity,  shall  make  and  render  a  list  or  return,  as  afore- 
said, to  the  collector  or  a  deputy  collector  of  the  district 
in  which  such  person  or  corporation  acting  in  a  fiduciary 
capacity  resides  or  does  business  of  the  amount  of  in- 
come, gains,  and  profits,  of  any  minor  or  person  for  whom 
they  act,  but  persons  having  less  than  three  thousand 
five  hundred  dollars  income  are  not  required  to  make  such 
report;  and  the  collector  or  deputy  collector,  shall  require 
every  list  or  return  to  be  verified  by  the  oath  or  affirmation 
of  the  party  rendering  it,  and  may  increase  the  amount 
of  any  list  or  return  if  he  has  reason  to  believe  that  the 
same  is  understated;  and  in  case  any  such  person  having 
a  taxable  income  shall  neglect  or  refuse  to  make  and  render 
such  list  and  return,  or  shall  render  a  willfully  false  or 
fraudulent  list  or  return,  it  shall  be  the  duty  of  the  col- 
lector or  deputy  collector,  to  make  such  list,  according 
to  the  best  information  he  can  obtain,  by  the  examina- 
tion of  such  person,  or  any  other  evidence,  and  to  add 
fifty  per  centum  as  a  penalty  to  the  amount  of  the  tax 
due  on  such  list  in  all  cases  of  willful  neglect  or  refusal  to 
make  and  render  a  list  or  return;  and  in  all  cases  of  a 
willfully  false  or  fraudulent  list  or  return  having  been 


FEDERAL  INCOME  TAX  ACTS  255 

rendered  to  add  one  hundred  per  centum  as  a  penalty  to 
the  amount  of  tax  ascertained  to  be  due,  the  tax  and  the 
additions  thereto  as  a  penalty  to  be  assessed  and  collected 
in  the  manner  provided  for  in  other  cases  of  willful  neglect 
or  refusal  to  render  a  list  or  return,  or  of  rendering  a  false 
or  fraudulent  return:  Provided,  That  any  person,  or  cor- 
poration in  his,  her,  or  its  own  behalf,  or  as  such  fiduciary, 
shall  be  permitted  to  declare,  under  oath  or  affirmation, 
the  form  and  manner  of  which  shall  be  prescribed  by  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  that  he,  she,  or  his  or  her, 
or  its  ward  or  beneficiary  was  not  possessed  of  an  income 
of  four  thousand  dollars,  hable  to  be  assessed  according 
to  the  provisions  of  this  Act;  or  may  declare  that  he,  she, 
or  it,  or  his,  her,  or  its  ward  or  beneficiary  has  been  assessed 
and  has  paid  an  income  tax  elsewhere  in  the  same  year, 
under  authority  of  the  United  States,  upon  all  his,  her, 
or  its  income,  gains,  or  profits,  and  upon  all  the  income, 
gains,  or  profits  for  which  he,  she,  or  it  is  liable  as  such 
fiduciary,  as  prescribed  by  law;  and  if  the  collector  or 
deputy  collector  shall  be  satisfied  of  the  truth  of  the  de- 
claration, such  person  or  corporation  shall  thereupon  be 
exempt  from  income  tax  in  the  said  district  for  that  year; 
or  if  the  fist  or  return  of  any  person  or  corporation,  com- 
pany, or  association  shall  have  been  increased  by  the 
collector  or  deputy  collector,  such  person  or  corporation, 
company,  or  association  may  be  permitted  to  prove  the 
amount  of  income  liable  to  be  assessed;  but  such  proof 
shall  not  be  considered  as  conclusive  of  the  facts,  and  no 
deductions  claimed  in  such  cases  shall  be  made  or  allowed 
until  approved  by  the  collector  or  deputy  collector.  Any 
person  or  company,  corporation  or  association  feeling 
aggrieved  by  the  decision  of  the  deputy  collector,  in  such 
cases  may  appeal  to  the  collector  of  the  district,  and  his 
decision  thereon,  unless  reversed  by  the  Commissioner 
of  Internal  Revenue,  shall  be  final.  If  dissatisfied  with  the 
decision  of  the  collector  such  person  or  corporation,  com- 


256  APPENDIX  [Act,  Aug.  27,  1894 

pany  or  association  may  submit  the  case,  with  all  the  pa- 
pers, to  the  Commissioner  of  Internal  Revenue  for  his  deci- 
sion, and  may  furnish  the  testimony  of  witnesses  to  prove 
any  relevant  facts,  having  served  notice  to  that  effect  upon 
the  Commissioner  of  Internal  Revenue,  as  herein  prescribed. 

Such  notice  shall  state  the  time  and  place  at  which, 
and  the  officer  before  whom,  the  testimony  will  be  taken; 
the  name,  age,  residence,  and  business  of  the  proposed  wit- 
ness, with  the  questions  to  be  propounded  to  the  witness, 
or  a  brief  statement  of  the  substance  of  the  testimony  he 
is  expected  to  give:  Provided,  That  the  Government  may 
at  the  same  time  and  place  take  testimony  upon  like 
notice  to  rebut  the  testimony  of  the  witnesses  examined 
by  the  person  taxed. 

The  notice  shall  be  delivered  or  mailed  to  the  Commis- 
sioner of  Internal  Revenue  a  sufficient  number  of  days 
previous  to  the  day  fixed  for  taking  the  testimony,  to 
allow  him,  after  its  receipt,  at  least  five  days,  exclusive 
of  the  period  required  for  mail  communication  with  the 
place  at  which  the  testimony  is  to  be  taken,  in  which  to 
give,  should  he  so  desire,  instructions  as  to  the  cross- 
examination  of  the  proposed  witness. 

Whenever  practicable,  the  affidavit  or  deposition  shall 
be  taken  before  a  collector  or  deputy  collector  of  internal 
revenue,  in  which  case  reasonable  notice  shall  be  given  to 
the  collector  or  deputy  collector  of  the  time  fixed  for  taking 
the  deposition  or  affidavit: 

Provided  further,  That  no  penalty  shall  be  assessed  upon 
any  person  or  corporation,  company,  or  association  for 
such  neglect  or  refusal  or  for  making  or  rendering  a  will- 
fully false  or  fraudulent  return,  except  after  reasonable 
notice  of  the  time  and  place  of  hearing,  to  be  prescribed 
by  the  Commissioner  of  Internal  Revenue,  so  as  to  give  the 
person  charged  an  opportunity  to  be  heard. 

Sec.  30.  The  taxes  or  incomes  herein  imposed  shall  be 
due  and  payable  on  or  before  the  first  day  of  July  in  each 


FEDERAL  INCOME  TAX  ACTS  257 

year;  and  to  any  sum  or  sums  annually  due  and  unpaid 
after  the  first  day  of  July  as  aforesaid,  and  for  ten  days 
after  notice  and  demand  thereof  by  the  collector,  there 
shall  be  levied,  in  addition  thereto,  the  smn  of  five  per 
centum  on  the  amount  of  taxes  unpaid,  and  interest  at 
the  rates  of  one  per  cent,  per  month  upon  said  tax  from 
the  time  the  same  becomes  due,  as  a  penalty,  except  from 
the  estates  of  deceased,  insane,  or  insolvent  persons. 

Sec.  31  Any  nonresident  may  receive  the  benefit  of  the 
exemptions  hereinbefore  provided  for  by  filing  with  the 
deputy  collector  of  any  district  a  true  list  of  all  his  prop- 
erty and  sources  of  income  in  the  United  States  and 
complying  with  the  provisions  of  section  twenty-nine 
of  this  act  as  if  a  resident.  In  computing  income  he  shall 
include  all  income  from  every  source,  but  unless  he  be  a 
citizen  of  the  United  States  he  shall  only  pay  on  that  part 
of  the  income  which  is  derived  from  any  source  in  the 
United  States.  In  case  such  nonresident  fails  to  file  such 
statement,  the  collector  of  each  district  shall  collect  the 
tax  on  the  income  derived  from  property  situated  in  his 
district,  subject  to  income  tax,  making  no  allowance  for 
exemptions,  and  all  property  belonging  to  such  nonresi- 
dent shall  be  hable  to  distraint  for  tax:  Provided,  That 
nonresident  corporations  shall  be  subject  to  the  same  laws 
as  to  tax  as  resident  corporations,  and  the  collection  of  the 
tax  shall  be  made  in  the  same  manner  as  provided  for 
collections  of  taxes  against  nonresident  persons. 

Sec.  32.  That  there  shall  be  assessed,  levied,  and  col- 
lected, except  as  herein  otherwise  provided,  a  tax  of  two  per 
centum  annually  on  the  net  profits  or  income  above  actual 
operating  and  business  expenses,  including  expenses  for 
materials  purchased  for  manufacture  or  bought  for  resale, 
losses,  and  interest  on  bonded  and  other  indebtedness, 
of  all  banks,  banking  institutions,  trust  companies,  saving 
institutions,  fire,  marine,  fife,  and  other  insurance  compa- 


258  APPENDIX  [Act,  Aug.  27,  1894 

nies,  railroad,  canal,  turnpike,  canal  navigation,  slack 
water,  telephone,  telegraph,  express,  electric  light,  gas, 
water,  street  railway  companies,  and  all  other  corpora- 
tions, companies,  or  associations  doing  business  for  profit 
in  the  United  States,  no  matter  how  created  and  organized, 
but  not  including  partnerships. 

That  said  tax  shall  be  paid  on  or  before  the  first  day  of 
July  in  each  year;  and  if  the  president  or  other  chief 
officer  of  any  corporation,  company,  or  association,  or  in 
the  case  of  any  foreign  corporation,  company,  or  associa- 
tion, the  resident  manager  or  agent  shall  neglect  or  refuse 
to  file  with  the  collector  of  the  internal  revenue  district 
in  which  said  corporation,  company,  or  association  shall 
be  located  or  be  engaged  in  business,  a  statement  verified 
by  his  oath  or  affirmation,  in  such  form  as  shall  be  pre- 
scribed by  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  showing  the 
amount  of  net  profits  or  income  received  by  said  corpora- 
tion, company,  or  association  during  the  whole  calendar 
year  last  preceding  the  date  of  filing  said  statement  as  here- 
inafter required,  the  corporation,  company,  or  association 
making  default  shall  forfeit  as  a  penalty  the  sum  of  one 
thousand  dollars  and  two  per  centum  on  the  amount  of 
taxes  due,  for  each  month  until  the  same  is  paid,  the  pay- 
ment of  said  penalty  to  be  enforced  as  provided  in  other 
cases  of  neglect  and  refusal  to  make  return  of  taxes  under 
the  internal  revenue  laws. 

The  net  profits  or  income  of  all  corporations,  companies, 
or  associations  shall  include  the  amounts  paid  to  share- 
holders, or  carried  to  the  account  of  any  fund,  or  used  for 
construction,  enlargement  of  plant,  or  any  other  expendi- 
ture or  investment  paid  from  the  net  annual  profits  made 
or  acquired  by  said  corporations,  companies,  or  associa- 
tions. 

That  nothing  herein  contained  shall  apply  to  States, 
counties,  or  municipalities;  nor  to  corporations,  companies, 
or  associations  organized  and  conducted  solely  ^or  chari- 


FEDERAL  INCOME  TAX  ACTS  259 

table,  religious,  or  educational  purposes,  including  frater- 
nal beneficiary  societies,  orders,  or  associations  operating 
upon  the  lodge  system  and  providing  for  the  payment 
of  life,  sick,  accident,  and  other  benefits  to  the  members 
of  such  societies,  orders,  or  associations  and  dependents  of 
such  members;  nor  to  the  stocks,  shares,  funds,  or  securi- 
ties held  by  any  fiduciary  or  trustee  for  charitable,  re- 
ligious, or  educational  purposes;  nor  to  building  and  loan 
associations  or  companies  which  make  loans  only  to  their 
shareholders;  nor  to  such  savings  banks,  savings  institu- 
tions, or  societies  as  shall,  first,  have  no  stockholders  or 
members  except  depositors,  and  no  capital  except  deposits; 
secondly,  shall  not  receive  deposits  to  an  aggregate  amount 
in  any  one  year,  of  more  than  one  thousand  dollars  from 
the  same  depositor;  thirdly,  shall  not  allow  an  accumula- 
tion or  total  of  deposits,  by  any  one  depositor,  exceeding 
ten  thousand  dollars;  fourthly,  shall  actually  divide  and 
distribute  to  its  depositors,  ratably  to  deposits,  all  the  earn- 
ings over  the  necessary  and  proper  expenses  of  such  bank, 
institution,  or  society,  except  such  as  shall  be  applied  to 
surplus;  fifthly,  shall  not  possess,  in  any  form,  a  surplus 
fund  exceeding  ten  per  centum  of  its  aggregate  deposits; 
nor  to  such  savings  banks,  savings  institutions,  or  societies 
composed  of  members  who  do  not  participate  in  the  profits 
thereof  and  which  pay  interest  or  dividends  only  to  their 
depositors;  nor  to  that  part  of  the  business  of  any  savings 
bank,  institution,  or  other  similar  association  having  a 
capital  stock,  that  is  conducted  on  the  mutual  plan  solely 
for  the  benefit  of  its  depositors  on  such  plan,  and  which 
shall  keep  its  account  of  its  business  conducted  on  such 
mutual  plan  separate  and  apart  from  its  other  accounts. 
Nor  to  any  insurance  company  or  association  which 
conducts  all  its  business  solely  upon  the  mutual  plan, 
and  only  for  the  benefit  of  its  policy-holders  or  members, 
and  having  no  capital  stock,  and  no  stock  or  shareholders, 
and  holding  all  its  property  in  trust  and  in  reserve  for  its 
policy-holders  or  members;  nor  to  that  part  of  the  business 


2G0  APPENDIX  [Act,  Aug.  27,  1894 

of  any  insurance  company  having  a  capital  stock  and 
stock  and  shareholders,  which  is  conducted  on  the  mutual 
plan,  separate  from  its  stock  plan  of  insurance,  and  solely 
for  the  benefit  of  the  pohcy-holders  and  members  insured 
on  said  mutual  plan,  and  holding  all  the  property  belong- 
ing to  and  derived  from  said  mutual  part  of  its  business 
in  trust  and  reserve  for  the  benefit  of  its  policy-holders 
and  members  insured  on  said  mutual  plan. 

That  all  State,  .county,  municipal,  and  town  taxes 
paid  by  corporations,  companies,  or  associations  shall  be 
included  in  the  operating  and  business  expenses  of  such 
corporations,  companies,  or  associations. 

Sec.  33.  That  there  shall  be  levied,  collected,  and  paid 
on  all  salaries  of  officers,  or  payments  for  services  to 
persons  in  the  civil,  military,  naval,  or  other  emplojnnent 
or  service  of  the  United  States,  including  Senators  and 
Representatives  and  Delegates  in  Congress,  when  exceed- 
ing the  rate  of  four  thousand  dollars  per  annum,  a  tax 
of  two  per  centum  on  the  excess  above  the  said  four  thou- 
sand dollars;  and  it  shall  be  the  duty  of  all  paymasters 
and  all  disbursing  officers  under  the  Government  of  the 
United  States,  or  persons  in  the  employ  thereof  when 
making  any  payment  to  any  officers  or  persons  as  aforesaid 
whose  compensation  is  determined  by  a  fixed  salary,  or 
upon  settling  or  adjusting  the  accounts  of  such  officers  or 
persons,  to  deduct  and  withhold  the  aforesaid  tax  of  two  per 
centum ;  and  the  pay  roll,  receipts,  or  accounts  of  officers 
or  persons  paying  such  tax  as  aforesaid  shall  be  made  to 
exhibit  the  fact  of  such  payment.  And  it  shall  be  the 
duty  of  the  accounting  officers  of  the  Treasury  Depart- 
ment, when  auditing  the  accounts  of  any  paymaster  or 
disbursing  officer,  or  any  officer  withholding  his  salary 
from  moneys  received  by  him,  or  when  settling  or  adjust- 
ing the  accounts  of  any  such  officer,  to  require  evidence 
that  the  taxes  mentioned  in  this  section  have  been  de- 
ducted and  paid  over  to  the  Treasurer  of  the  United 


FEDERAL  INCOME  TAX  ACTS  261 

States,  or  other  officer  authorized  to  receive  the  same. 
Every  corporation  which  pays  to  any  employe  a  salary  or 
compensation  exceeding  four  thousand  dollars  per  annum 
shall  report  the  same  to  the  collector  or  deputy  collector 
of  his  district,  and  said  employe  shall  pay  thereon,  subject 
to  the  exemptions  herein  provided  for,  the  tax  of  two  per 
centum  on  the  excess  of  his  salary  over  four  thousand 
dollars:  Provided,  That  salaries  due  to  State,  county,  or 
municipal  officers  shall  be  exempt  from  the  income  tax 
herein  levied. 

Sec.  34.  That  sections  thirty-one  hundred  and  sixty- 
seven,  thirty-one  hundred  and  seventy-two,  thirty-6ne 
hundred  and  seventy-three,  and  thirty-one  hundred  and 
seventy-six  of  the  Revised  Statutes  of  the  United  States  as 
amended  are  hereby  amended  so  as  to  read  as  follows : 

Source:  Act  June  30,  1864,  c.  173,  13  Stat.  238. 

"    Mar.  3,  1865,  c.  78,  13  Stat.  469,  471. 
"    Aug.  27,  1894,  c.  328,  §  34,  28  Stat.  557. 

Sec.  3167.  See  Revised  Statutes,  §  3176,  p.  120. 

Sec.  3172.  See  Revised  Statutes,  §  3172,  p.  121. 

Sec.  3173.  See  Revised  Statutes,  §  3173,  p.  121. 

Sec.  3176.  See  Revised  Statutes,  §  3176,  p.  126. 
(As  amended  in  unimportant  particulars  by  Act,  1913.) 

Sec.  35.  That  every  corporation,  company,  or  associa- 
tion doing  business  for  profit  shall  make  and  render  to 
the  collector  of  its  collection  district,  on  or  before  the  first 
Monday  of  March  in  every  year,  beginning  with  the  year 
eighteen  hundred  and  ninety-five,  a  full  return,  verified 
by  oath  or  affirmation,  in  such  form  as  the  Commissioner 
of  Internal  Revenue  may  prescribe,  of  all  the  following 
matters  for  the  whole  calendar  year  last  preceding  the 
date  of  such  return : 

First.  The  gross  profits  of  such  corporation,  company, 
or  association,  from  all  kinds  of  business  of  every  name 
and  nature. 


262  APPENDIX  [Act,  Aug.  27,  1894 

Second.  The  expenses  of  such  corporation,  company, 
or  association,  exclusive  of  interest,  annuities,  and  divi- 
dends. 

Third.  The  net  profits  of  such  corporation,  company, 
or  associatioli,  without  allowance  for  interest,  annuities, 
or  dividends. 

Fourth.  The  amount  paid  on  account  of  interest,  annui- 
ties, and  dividends,  stated  separately. 

Fifth.  The  amount  paid  in  salaries  of  four  thousand 
dollars  or  less  to  each  person  employed. 

Sixth.  The  amount  paid  in  salaries  of  more  than  four 
thousand  dollars  to  each  person  employed,  and  name  and 
address  of  each  of  such  persons  and  the  amount  paid  to 
each. 

Sec.  36.  That  it  shall  be  the  duty  of  every  corporation, 
company,  or  association  doing  business  for  profit  to  keep 
full,  regular,  and  accurate  books  of  account,  upon  which 
all  its  transactions  shall  be  entered  from  day  to  day,  in 
regular  order,  and  whenever  a  collector  or  deputy  collector 
of  the  district  in  which  any  corporation,  company,  or 
association  is  assessable  shall  believe  that  a  true  and 
correct  return  of  the  income  of  such  corporation,  com- 
pany, or  association  has  not  been  made,  he  shall  make 
an  affidavit  of  such  belief  and  of  the  grounds  on  which 
it  is  founded,  and  file  the  same  with  the  Commissioner 
of  Internal  Revenue,  and  if  said  Commissioner  shall, 
on  examination  thereof,  and  after  full  hearing  upon  notice 
given  to  all  parties,  conclude  there  is  good  ground  for 
such  belief,  he  shall  issue  a  request  in  writing  to  such 
corporation,  company,  or  association  to  permit  an  in- 
spection of  the  books  of  such  corporation,  company, 
or  association  to  be  made:  and  if  such  corporation,  com- 
pany, or  association  shall  refuse  to  comply  with  such  re- 
quest, then  the  collector  or  deputy  collector  of  the  district 
shall  make  from  such  information  as  he  can  obtain  an 
estimate  of  the  amount  of  such  income  and  then  add 


FEDERAL  INCOME  TAX  ACTS  263 

fifty  per  centum  thereto,  which  said  assessment  so  made 
shall  then  be  the  lawful  assessment  of  such  income. 

Sec.  37.  That  it  shall  be  the  duty  of  every  collector 
of  internal  revenue,  to  whom  any  payment  of  any  taxes 
other  than  the  tax  represented  by  an  adhesive  stamp  or 
other  engraved  stamp  is  made  under  the  provisions  of 
this  Act,  to  give  to  the  person  making  such  payment  a 
full  written  or  printed  receipt,  expressing  the  amount 
paid  and  the  particular  account  for  which  such  payment 
was  made;  and  whenever  such  payment  is  made  such 
collector  shall,  if  required,  give  a  separate  receipt  for 
each  tax  paid  by  any  debtor,  on  account  of  payments 
made  to  or  to  be  made  by  him  to  separate  creditors  in 
such  form  that  such  debtor  can  conveniently  produce  the 
same  separately  to  his  several  creditors  in  satisfaction  of 
their  respective  demands  to  the  amounts  specified  in  such 
receipts;  and  such  receipts  shall  be  sufficient  evidence  in 
favor  of  such  debtor,  to  justify  him  in  withholding  the 
amount  therein  expressed  from  his  next  payment  to  this 
creditor;  but  such  creditor  may  upon  giving  to  his  debtor 
a  full  written  receipt,  acknowledging  the  payment  to 
him  of  whatever  sum  may  be  actually  paid,  and  accept- 
ing the  amount  of  tax  paid  as  aforesaid  (specifying  the 
same)  as  a  further  satisfaction  of  the  debt  to  that  amount, 
require  the  surrender  to  him  of  such  collector's  receipt. 


JOINT  RESOLUTION  OF  FEBRUARY  21,  1895  ^ 
Joint  Resolution  Extending  Time  to  File  Returns 

Resolved,  That  the  time  fixed  by  existing  law  for  the 
rendering  of  income  returns,  to  wit:  On  or  before  the  first 
Monday  of  March  in  every  year  (Section  35,  Act  of  August 
28,  1894,  and  Section  3173,  Revised  Statutes  as  amended 
by  Section  34  of  that  Act)  is  hereby  extended  with  refer- 
ence only  to  returns  of  income  for  the  year  1894,  so  that 
it  shall  be  lawful  to  make  such  returns  for  that  year  on  or 
before  April  15,  1895. 

Resolved,  That  in  computing  incomes  under  said  act, 
the  amounts  necessarily  paid  for  fire  insurance  premiums 
and  for  ordinary  repairs  shall  be  deducted. 

Resolved,  That  in  computing  incomes  under  said  act, 
the  amounts  received  as  dividends  upon  the  stock  of  any 
corporation,  company,  or  association  shall  not  be  included 
in  case  such  dividends  are  also  Uable  to  the  tax  of  2  per 
cent,  upon  the  net  profits  of  said  corporation,  company, 
or  association,  although  such  tax  may  not  have  been 
actually  paid  by  said  corporation,  company,  or  association 
at  the  time  of  making  returns  by  the  person,  corporation, 
or  association  receiving  such  dividends,  and  returns  or 
reports  of  the  names  and  salaries  of  employes  shall  not 
be  required  from  employers  unless  called  for  by  the  col- 
lector in  order  to  verify  the  returns  of  employes. 

^  28  U.  S.  Stat,  at  Large,  971. 


264 


ACT  OF  AUGUST  5,  1909  ^ 

Chapter  VI. — An  Act  to  provide  revenue,  equalize  duties 
and  encourage  industries  of  the  United  States,  and  for 
other  purposes. 


Sec.  38.  That  every  corporation,  joint  stock  company 
or  association,  organized  for  profit  and  having  a  capital 
stock  represented  by  shares,  and  every  insurance  com- 
pany, now  or  hereafter  organized  under  the  laws  of  the 
United  States  or  of  any  State  or  Territory  of  the  United 
States  or  under  the  acts  of  Congress  applicable  to  Alaska 
or  the  district  of  Columbia,  or  now  or  hereafter  organized 
under  the  laws  of  any  foreign  country  and  engaged  in 
business  in  any  State  or  Territory  of  the  United  States 
or  in  Alaska  or  in  the  District  of  Columbia,  shall  be  sub- 
ject to  pay  annually  a  special  excise  tax  with  respect  to 
the  carrying  on  or  doing  business  by  such  corporation, 
joint  stock  company  or  association,  or  insurance  com- 
pany, equivalent  to  one  per  centum  upon  the  entire  net 
income  over  and  above  five  thousand  dollars  received  by 
it  from  all  sources  during  such  year,  exclusive  of  amounts 
received  by  it  as  dividends  upon  stock  of  other  corpora- 
tions, joint  stock  companies,  or  associations,  or  insurance 
companies,  subject  to  the  tax  hereby  imposed;  or  if  or- 
ganized under  the  laws  of  any  foreign  country,  upon  the 
amount  of  net  income  over  and  above  five  thousand 
dollars  received  by  it  from  business  transacted  and  capital 
invested  within  the  United  States  and  its  Territories, 
Alaska,  and  the  District  of  Columbia  during  such  year, 
exclusive  of  amounts  so  received  by  it  as  dividends  upon 
» 36  U.  S.  Stat,  at  Large,  Ch.  VI. 
265 


266  APPENDIX  [Act,  Aug.  5,  1009 

stock  of  other  corporations,  joint  stock  companies  or 
associations,  or  insurance  companies,  subject  to  the  tax 
hereby  imposed;  Provided,  however,  That  nothing  in  this 
section  contained  shall  apply  to  labor,  agricultural  or 
horticultural  organizations,  or  to  fraternal  beneficiary  so- 
cieties, orders,  or  associations  operating  under  the  lodge 
system,  and  providing  for  the  payment  of  life,  sick,  acci- 
dent, and  other  benefits  to  the  members  of  such  societies, 
orders  or  associations,  and  dependents  of  such  members 
nor  to  domestic  building  and  loan  associations,  organized 
and  operated  exclusively  for  the  mutual  benefit  of  their 
members,  nor  to  any  corporation  or  association  organized 
and  operated  exclusively  for  religious  charitable,  or  edu- 
cational purposes,  no  part  of  the  net  income  of  which 
inures  to  the  benefit  of  any  private  stockholder  or  individ- 
ual. 

Second.  Such  net  income  shall  be  ascertained  by  de- 
ducting from  the  gross  amount  of  the  income  of  such  cor- 
poration, joint  stock  company  or  association,  or  insurance 
company,  received  within  the  year  from  all  sources,  ffirst) 
all  the  ordinary  and  necessary  expenses  actually  paid 
within  the  year  out  of  income  in  the  maintenance  and 
operation  of  its  business  and  properties,  including  all 
charges  such  as  rentals  or  franchise  payments,  required  to 
be  made  as  a  condition  to  the  continued  use  or  possession 
of  property;  (second)  all  losses  actually  sustained  within 
the  year  and  not  compensated  by  insurance  or  other- 
wise, including  a  reasonable  allowance  for  depreciation  of 
property,  if  any,  and  in  the  case  of  insurance  companies 
the  sums  other  than  dividends,  paid  within  the  year  on 
policy  and  annuity  contracts  and  the  net  addition,  if  any, 
required  by  law  to  be  made  within  the  year  to  reserve 
funds;  (third)  interest  actually  paid  within  the  year  on  its 
bonded  or  other  indebtedness  to  an  amount  of  such  bonds 
and  other  indebtedness  not  exceeding  the  paid-up  capital 
stock  of  such  corporation,  joint  stock  company  or  associa- 
tion, or  insurance  company,  outstanding  at  the  close  of 


FEDERAL  INCOME  TAX  ACTS  267 

the  year,  and  in  the  ease  of  a  bank,  banking  association 
or  trust  company,  all  interest  actually  paid  by  it  within 
the  year  on  deposits;  (fourth)  all  sums  paid  by  it  within 
the  year  for  taxes  imposed  under  the  authority  of  the 
United  States  or  of  any  State  or  Territory  thereof,  or  im- 
posed by  the  government  of  any  foreign  country  as  a  con- 
dition to  carrying  on  business  therein;  (fifth)  all  amounts 
received  by  it  within  the  year  as  dividends  upon  stock 
of  other  corporations,  joint  stock  companies  or  associa- 
tions, or  insurance  companies,  subject  to  the  tax  hereby 
imposed:  Provided,  That  in  the  case  of  a  corporation, 
joint  stock  company  or  association,  or  insurance  com- 
pany, organized  under  the  laws  of  a  foreign  country, 
such  net  income  shall  be  ascertained  by  deducting  from 
the  gross  amount  of  its  income  received  within  the  year 
from  business  transacted  and  capital  invested  within  the 
United  States  and  any  of  its  Territories,  Alaska,  and  the 
District  of  Columbia,  (first)  all  the  ordinary  and  necessary 
expenses  actually  paid  within  the  year  out  of  earnings  in 
the  maintenance  and  operation  of  its  business  and  prop- 
erty within  the  United  States  and  its  Territories,  Alaska, 
and  the  District  of  Columbia,  including  all  charges  such  as 
rentals  or  franchise  payments  required  to  be  made  as  a 
condition  to  the  continued  use  or  possession  of  property ; 
(second)  all  losses  actually  sustained  within  the  year  in 
business  conducted  by  it  within  the  United  States  or  its 
Territories,  Alaska,  or  the  District  of  Columbia  not  com- 
pensated by  insurance  or  otherwise,  including  a  reason- 
able allowance  for  depreciation  of  property,  if  any,  and 
in  the  case  of  insurance  companies  the  sums  other  than 
dividends,  paid  within  the  year  on  policy  and  annuity 
contracts  and  the  net  addition,  if  any,  required  by  law 
to  be  made  within  the  year  to  reserve  funds:  f third) 
interest  actually  paid  within  the  year  on  its  bonded  or  other 
indebtedness  to  an  amount  of  such  bonded  and  other 
indebtedness,  not  exceeding  the  proportion  of  its  paid-up 
capital  stock  outstanding  at  the  close  of  the  year  which 


268  APPENDIX  [Act,  Aug.  5,  1909 

the  gross  amount  of  its  income  for  the  year  from  business 
transacted  and  capital  invested  within  the  United  States 
and  any  of  its  Territories,  Alaska,  and  the  District  of 
Columbia  bears  to  the  gross  amount  of  its  income  derived 
from  all  sources  within  and  without  the  United  States; 
(fourth)  the  sums  paid  by  it  within  the  year  for  taxes 
imposed  under  the  authority  of  the  United  States  or  of 
any  State  or  Territory  thereof;  (fifth)  all  amounts  re- 
ceived by  it  within  the  year  as  dividends  upon  stock  of 
other  corporations,  joint  stock  companies  or  associations, 
and  insurance  companies,  subject  to  the  tax  hereby  im- 
posed. In  the  case  of  assessment  insurance  companies 
the  actual  deposit  of  sums  with  State  or  Territorial  officers, 
pursuant  to  law,  as  additions  to  guaranty  or  reserve  funds 
shall  be  treated  as  being  payments  required  by  law  to 
reserve  funds. 

Third.  There  shall  be  deducted  from  the  amount  of  the 
net  income  of  each  of  such  corporations,  joint  stock  com- 
panies or  associations,  or  insurance  companies,  ascertained 
as  provided  in  the  foregoing  paragraphs  of  this  section, 
the  sum  of  five  thousand  dollars,  and  said  tax  shall  be 
computed  upon  the  remainder  of  said  net  income  of  such 
corporation,  joint  stock  company  or  association,  or  in- 
surance company,  for  the  year  ending  December  thirty- 
first,  nineteen  hundred  and  nine,  and  for  each  calendar 
year  thereafter;  and  on  or  before  the  first  day  of  March, 
nineteen  hundred  and  ten,  and  the  first  day  of  March  in 
each  year  thereafter,  a  true  and  accurate  return  under 
oath  or  affirmation  of  its  president,  vice-president,  or  other 
principal  officer,  and  its  treasurer  or  assistant  treasurer, 
shall  be  made  by  each  of  the  corporations,  joint  stock 
companies  or  associations,  and  insurance  companies,  sub- 
ject to  the  tax  imposed  by  this  section,  to  the  collector  of 
internal  revenue  for  the  district  in  which  such  corpora- 
tion, joint  stock  company  or  association,  or  insurance  com- 
pany has  its  principal  place  of  business,  or,  in  the  case 
of  a  corporation,  joint  stock  company  or  association,  or 


FEDERAL  INCOME  TAX  ACTS  269 

insurance  company,  organized  under  the  laws  of  a  foreign 
country,  in  the  place  where  its  principal  business  is  carried 
on  within  the  United  States,  in  such  form  as  the  Commis- 
sioner of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall  prescribe,  setting  forth 
(first)  the  total  amount  of  the  paid-up  capital  stock  of 
such  corporation,  joint  stock  company  or  association,  or 
insurance  company,  outstanding  at  the  close  of  the  year; 
(second)  the  total  amount  of  the  bonded  and  other  in- 
debtedness of  such  corporation,  joint  stock  company 
or  association  or  insurance  company  at  the  close  of  the 
year;  (third)  the  gross  amount  of  the  income  of  such 
corporation,  joint  stock  company  or  association,  or  in- 
surance company  received  during  such  year  from  all 
sources,  and  if  organized  under  the  laws  of  a  foreign 
country  the  gross  amount  of  its  income  received  within 
the  year  from  business  transacted  and  capital  invested 
within  the  United  States  and  any  of  its  Territories, 
Alaska,  and  the  District  of  Columbia;  also  the  amount 
received  by  such  corporation,  joint  stock  company  or 
association,  or  insurance  company  within  the  year  by 
way  of  dividends  upon  stock  of  other,  corporations,  joint 
stock  companies  or  associations,  or  insurance  companies, 
subject  to  the  tax  imposed  by  this  section;  (fourth)  the 
total  amount  of  all  the  ordinary  and  necessary  expenses 
actually  paid  out  of  earnings  in  the  maintenance  and  oper- 
ation of  the  business  and  properties  of  such  corporation, 
joint  stock  company  or  association,  or  insurance  company, 
within  the  year,  stating  separately  all  charges  such  as 
rentals  or  franchise  payments  required  to  be  made  as  a 
condition  to  the  continued  use  or  possession  of  property, 
and  if  organized  under  the  laws  of  a  foreign  country  the 
amount  so  paid  in  the  maintenance  and  operation  of  its 
business  within  the  United  States  and  its  Territories, 
Alaska,  and  the  District  of  Columbia;  (fifth)  the  total 
amount  of  all  losses  actually  sustained  during  the  year 
and  not  compensated  by  insurance  or  otherwise,  stating 


270  APPENDIX  [Act,  Aug.  5,  1909 

separately  any  amounts  allowed  for  depreciation  of  prop- 
erty, and  in  the  case  of  insurance  companies  the  sums  other 
than  dividends,  paid  within  the  year  on  policy  and  an- 
nuity contracts  and  the  net  addition,  if  any,  required  by 
law  to  be  made  within  the  year  to  reserve  funds;  and  in 
the  case  of  a  corporation,  joint  stock  company  or  associa- 
tion, or  insurance  company,  organized  under  the  laws  of  a 
foreign  country,  all  losses  actually  sustained  by  it  during 
the  year  in  business  conducted  by  it  within  the  United 
States  or  its  Territories,  Alaska,  and  the  District  of  Colum- 
bia, not  compensated  by  insurance  or  otherwise,  stating 
separately  any  amounts  allowed  for  depreciation  of  prop- 
erty, and  in  the  case  of  insurance  companies  the  sums  other 
than  dividends,  paid  within  the  year  on  policy  and  annuity 
contracts  and  the  net  addition,  if  any,  required  by  law  to 
be  made  within  the  year  to  reserve  fund;  (sixth)  the 
amount  of  interest  actually  paid  within  the  year  on  its 
bonded  or  other  indebtedness  to  an  amount  of  such  bonded 
and  other  indebtedness  not  exceeding  the  paid-up  capital 
stock  of  such  corporation,  joint  stock  company  or  associa- 
tion, or  insurance  company,  outstanding  at  the  close  of 
the  year,  and  in  the  case  of  a  bank,  banking  association, 
or  trust  company,  stating  separately  all  interest  paid  by  it 
within  the  year  on  deposits;  or  in  case  of  a  corporation, 
joint  stock  company  or  association,  or  insurance  com- 
pany, organized  under  the  laws  of  a  foreign  country, 
interest  so  paid  on  its  bonded  or  other  indebtedness  to  an 
amount  of  such  bonded  and  other  indebtedness  not  ex- 
ceeding the  proportion  of  its  paid-up  capital  stock  out- 
standing at  the  close  of  the  year,  which  the  gross  amount 
of  its  income  for  the  year  from  business  transacted  and 
capital  invested  within  the  United  States  and  any  of  its 
Territories,  Alaska,  and  the  District  of  Columbia,  bears 
to  the  gross  amount  of  its  income  derived  from  all  sources 
within  and  without  the  United  States;  (seventh)  the 
amount  paid  by  it  within  the  year  for  taxes  imposed  under 
the  authority  of  the  United  States  or  any  State  or  Terri- 


FEDERAL  INCOME  TAX  ACTS  271 

tory  thereof,  and  separately  the  amount  so  paid  by  it 
for  taxes  imposed  by  the  government  of  any  foreign 
country  as  a  condition  to  carrying  on  business  therein; 
(eighth)  the  net  income  of  such  corporation,  joint  stock 
company  or  association,  or  insurance  company,  after 
making  the  deductions  in  this  section  authorized.  All 
such  returns  shall  as  received  be  transmitted  forthwith 
by  the  collector  to  the  Commissioner  of  Internal  Revenue. 
Fourth.  Whenever  evidence  shall  be  produced  before 
the  Commissioner  of  Internal  Revenue  which  in  the  opin- 
ion of  the  commissioner  justifies  the  belief  that  the  re- 
turn made  by  any  corporation,  joint  stock  company  or 
association,  or  insurance  company  is  incorrect,  or  when- 
ever any  collector  shall  report  to  the  Commissioner  of 
Internal  Revenue  that  any  corporation,  joint  stock  com- 
pany or  association,  or  insurance  company  has  failed  to 
make  a  return  as  required  by  law,  the  Commissioner  of 
Internal  Revenue  may  require  from  the  corporation,  joint 
stock  company  or  association,  or  insurance  company  mak- 
ing such  return,  such  further  information  with  reference 
to  its  capital,  income,  losses,  and  expenditures  as  he  may 
deem  expedient;  and  the  Commissioner  of  Internal  Reve- 
nue, for  the  purpose  of  ascertaining  the  correctness  of 
such  return  or  for  the  purpose  of  making  a  return  where 
none  has  been  made,  is  hereby  authorized,  by  any  regu- 
larly appointed  revenue  agent  specially  designated  by 
him  for  that  purpose,  to  examine  any  books  and  papers 
bearing  upon  the  matters  required  to  be  included  in  the 
return  of  such  corporation,  joint  stock  company  or  associa- 
tion, or  insurance  company,  and  to  require  the  attendance 
of  any  officer  or  employe  of  such  corporation,  joint  stock 
company  or  association,  or  insurance  company,  and  to 
take  his  testimony  with  reference  to  the  matter  required 
by  law  to  be  included  in  such  return,  with  power  to  ad- 
minister oaths  to  such  person  or  persons;  and  the  Commis- 
sioner of  Internal  Revenue  may  also  invoke  the  aid  of  any 
court  of  the  United  States  having  jurisdiction  to  require 


272  APPENDIX  [Act.  Aug.  5,  1909 

the  attendance  of  such  officers  or  employes  and  the  pro- 
duction of  such  books  and  papers.  "Upon  the  information 
so  acquired  the  Conamissioner  of  Internal  Revenue  may 
amend  any  return  or  make  a  return  where  none  has  been 
made.  All  proceedings  taken  by  the  Commissioner  of 
Internal  Revenue  under  the  provisions  of  this  section 
shall  be  subject  to  the  approval  of  the  Secretary  of  the 
Treasury. 

Fifth.  All  returns  shall  be  retained  by  the  Commis- 
sioner of  Internal  Revenue,  who  shall  make  assessments 
thereon;  and  in  case  of  any  return  made  with  false  or 
fraudulent  intent,  he  shall  add  one  hundred  per  centum 
of  such  tax,  and  in  case  of  a  refusal  or  neglect  to  make  a 
return  or  to  verify  the  same  as  aforesaid  he  shall  add  fifty 
per  centum  of  such  tax.  In  case  of  neglect  occasioned  by 
the  sickness  or  absence  of  an  officer  of  such  corporation, 
joint  stock  company  or  association,  or  insurance  company, 
required  to  make  said  return,  or  for  other  sufficient  reason, 
the  collector  may  allow  such  further  time  for  making  and 
delivering  such  return  as  he  may  deem  necessary,  not 
exceeding  thirty  days.  The  amount  so  added  to  the  tax 
shall  be  collected  at  the  same  time  and  in  the  same  manner 
as  the  tax  originally  assessed,  unless  the  refusal,  neglect, 
or  falsity  is  discovered  after  the  date  for  payment  of  said 
taxes,  in  which  case  the  amount  so  added  shall  be  paid  by 
the  delinquent  corporation,  joint  stock  company  or  associa- 
tion, or  insurance  company  immediately  upon  notice 
given  by  the  collector.  All  assessments  shall  be  made 
and  the  several  corporations,  joint  stock  companies  or 
associations,  or  insurance  companies,  shall  be  notified  of 
the  amount  for  which  they  are  respectively  liable  on  or 
before  the  first  day  of  June  of  each  successive  year,  and 
said  assessments  shall  be  paid  on  or  before  the  thirtieth 
day  of  June,  except  in  cases  of  refusal  or  neglect  to  make 
such  return,  and  in  cases  of  false  or  fraudulent  returns,  in 
which  cases  the  Commissioner  of  Internal  Revenue  shall, 
upon  the  discovery  thereof,  at  any  time  within  three  years 


FEDERAL  INCOME  TAX  ACTS  273 

after  said  return  is  due,  make  a  return  upon  information 
obtained  as  above  provided  for,  and  the  assessment  made 
by  the  Commissioner  of  Internal  Revenue  thereon  shall 
be  paid  by  such  corporation,  joint  stock  company  or  asso- 
ciation, or  insurance  company  immediately  upon  notifi- 
cation of  the  amount  of  such  assessment;  and  to  any  sum 
or  sums  due  and  unpaid  after  the  thirtieth  day  of  June 
in  any  year,  and  for  ten  days  after  notice  and  demand 
thereof  by  the  collector,  there  shall  be  added  the  sum  of 
five  per  centum  on  the  amount  of  tax  unpaid  and  interest 
at  the  rate  of  one  per  centum  per  month  upon  said  tax 
from  the  time  the  same  becomes  due. 

Sixth.  When  the  assessment  shall  be  made,  as  provided 
in  this  section,  the  returns,  together  with  any  corrections 
thereof  which  may  have  been  made  by  the  commissioner, 
shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open 
to  inspection  as  such. 

Seventh.  It  shall  be  unlawful  for  any  collector,  deputy 
collector,  agent,  clerk,  or  other  officer  or  employe  of  the 
United  States  to  divulge  or  make  known  in  any  manner 
whatever  not  provided  by  law  to  any  person  any  informa- 
tion obtained  by  him  in  the  discharge  of  his  official  duty, 
or  to  divulge  or  make  known  in  any  manner  not  provided 
by  law  any  document  received,  evidence  taken,  or  report 
made  under  this  section  except  upon  the  special  direction 
of  the  President;  and  any  offense  against  the  foregoing 
provision  shall  be  a  misdemeanor  and  be  punished  by  a 
fine  not  exceeding  one  thousand  dollars,  or  by  imprison- 
ment not  exceeding  one  year,  or  both,  at  the  discretion  of 
the  court. 

Eighth.  If  any  of  the  corporations,  joint  stock  com- 
panies or  associations,  or  insurance  companies  aforesaid, 
shall  refuse  or  neglect  to  make  a  return  at  the  time  or 
times  hereinbefore  specified  in  each  year,  or  shall  render 
a  false  or  fraudulent  return,  such  corporation,  joint  stock 
company  or  association,  or  insurance  company  shall  be 


274  APPENDIX  [Act,  Aug.  5,  1909 

liable  to  a  penalty  of  not  less  than  one  thousand  dollars 
and  not  exceeding  ten  thousand  dollars. 

Any  person  authorized  by  law  to  make,  render,  sign,  or 
verify  any  return,  who  makes  any  false  or  fraudulent 
return,  or  statement,  with  intent  to  defeat  or  evade  the 
assessment  required  by  this  section  to  be  made,  shall  be 
guilty  of  a  misdemeanor,  and  shall  be  fined  not  exceed- 
ing one  thousand  dollars  or  be  imprisoned  not  exceeding 
one  year,  or  both,  at  the  discretion  of  the  court,  with  the 
costs  of  prosecution. 

All  laws  relating  to  the  collection,  remission,  and  refund 
of  internal-revenue  taxes,  so  far  as  applicable  to  and  not 
inconsistent  with  the  provisions  of  this  section,  are  hereby 
extended  and  made  applicable  to  the  tax  imposed  by  this 
section. 

Jurisdiction  is  hereby  conferred  upon  the  circuit  and 
district  courts  of  the  United  States  for  the  district  within 
which  any  person  summoned  under  this  section  to  appear 
to  testify  or  to  produce  books  as  aforesaid,  shall  reside 
to  compel  such  attendance,  production  of  books,  and  testi- 
mony by  appropriate  process. 


ACT  OF  OCTOBER  3,   1913  * 

To  reduce  tariff  duties  and  to  provide  revenue  for  the  Gov- 
ernment, and  for  other  purposes 

Section  II 

A.  Subdivision  1.  That  there  shall  be  levied,  assessed, 
collected  and  paid  annually  upon  the  entire  net  income 
arising  or  accruing  from  all  sources  in  the  preceding  cal- 
endar year  to  every  citizen  of  the  United  States,  whether 
residing  at  home  or  abroad,  and  to  every  person  residing 
in  the  United  States,  though  not  a  citizen  thereof,  a  tax 
of  1  per  centum  per  annum  upon  such  income,  except  as 
hereinafter  provided;  and  a  like  tax  shall  be  assessed, 
levied,  collected,  and  paid  annually  upon  the  entire  net 
income  from  all  property  owned  and  of  every  business, 
trade,  or  profession  carried  on  in  the  United  States  by 
persons  residing  elsewhere. 

Subdivision  2.  In  addition  to  the  income  tax  provided 
under  this  section  (herein  referred  to  as  the  normal  in- 
come tax)  there  shall  be  levied,  assessed,  and  collected 
upon  the  net  income  of  every  individual  an  additional 
income  tax  (herein  referred  to  as  the  additional  tax)  of  1 
per  centum  per  annum  upon  the  amount  by  which  the 
total  net  income  exceeds  $20,000  and  does  not  exceed 
$50,000,  and  2  per  centum  per  annum  upon  the  amount 
by  which  the  total  net  income  exceeds  $50,000  and  does 
not  exceed  $75,000,  3  per  centum  per  annum  upon  the 
amount  by  which  the  total  net  income  exceeds  $75,000 
and  does  not  exceed  $100,000,  4  per  centum  per  annum 
upon  the  amount  by  which  the  total  net  income  exceeds 
1 38  U.  S.  Stat,  at  Large,  Ch.  XVI. 
275 


276  APPENDIX  [Act,  Oct.  3,  1913 

$100,000  and  does  not  exceed  $250,000,  5  per  centum  per 
annum  upon  the  amount  by  which  the  total  net  income 
exceeds  $250,000  and  does  not  exceed  $500,000,  and  6  per 
centum  per  annum  upon  the  amount  by  which  the  total 
net  income  exceeds  $500,000. 

All  the  provisions  of  this  section  relating  to  individuals 
who  are  to  be  chargeable  with  the  normal  income  tax,  so 
far  as  they  are  applicable  and  are  not  inconsistent  with 
this  subdivision  of  paragraph  A,  shall  apply  to  the  levy, 
assessment,  and  collection  of  the  additional  tax  imposed 
under  this  section. 

Every  person  subject  to  this  additional  tax  shall,  for 
the  purpose  of  its  assessment  and  collection,  make  a 
personal  return  of  his  total  net  income  from  all  sources, 
corporate  or  otherwise,  for  the  preceding  calendar  year, 
under  rules  and  regulations  to  be  prescribed' by  the  Com- 
missioner of  Internal  Revenue  and  approved  by  the 
Secretary  of  the  Treasury. 

For  the  purpose  of  this  additional  tax  the  taxable  in- 
come of  any  individual  shall  embrace  the  share  to  which 
he  would  be  entitled  of  the  gains  and  profits,  if  divided  or 
distributed,  whether  divided  or  distributed  or  not,  of  all 
"corporations,  joint  stock  companies,  or  associations 
however  created  or  organized,"  formed  or  fraudulently 
availed  of  for  the  purpose  of  preventing  the  imposition 
of  such  tax  through  the  medium  of  permitting  such  gains 
and  profits  to  accumulate  instead  of  being  divided  or 
distributed;  and  the  fact  that  any  such  ''corporation, 
joint  stock  company,  or  association  is  a  mere  holding 
company,"  or  that  the  gains  and  profits  are  permitted  to 
accumulate  beyond  the  reasonable  needs  of  the  business 
shall  be  prima  facie  evidence  of  a  fraudulent  purpose  to 
escape  such  tax;  but  the  fact  that  the  gains  and  profits 
are  in  any  case  permitted  to  accumulate  and  become  sur- 
plus shall  not  be  construed  as  evidence  of  a  purpose  to 
escape  the  said  tax  in  such  case  unless  the  Secretary  of  the 
Treasury  shall  certify  that  in  his  opinion  such  accumula- 


FEDERAL  INCOME  TAX  ACTS  277 

tion  is  unreasonable  for  the  purposes  of  the  business. 
When  requested  by  the  Commissioner  of  Internal  Revenue, 
or  any  district  collector  of  internal  revenue,  such  "corpora- 
tion, joint  stock  company,  or  association,"  shall  forward 
to  him  a  correct  statement  of  such  profits  and  the  names 
of  the  individuals  who  would  be  entitled  to  the  same  if 
distributed.    (See  p.  67.) 

B.  That,  subject  only  to  such  exemptions  and  deduc- 
tions as  are  hereinafter  allowed,  the  net  income  of  a 
taxable  person  shall  include  gains,  profits,  and  income  de- 
rived from  salaries,  wages,  or  compensation  for  personal 
service  of  whatever  kind  and  in  whatever  form  paid,  or 
,  from  professions,  vocations,  businesses,  trade,  commerce, 
or  sales  or  dealings  in  property,  whether  real  or  personal, 
growing  out  of  the  ownership  or  use  of  or  interest  in  real 
or  personal  property,  also  from  interest,  rent,  dividends, 
securities,  or  the  transaction  of  any  lawful  business  carried 
on  for  gain  or  profit,  or  gains  or  profits  and  income  derived 
from  any  source  whatever,  including  the  income  from  but 
not  the  value  of  property  acquired  by  gift,  bequest,  devise, 
or  descent:  Provided,  That  the  proceeds  of  life  insurance 
policies  paid  upon  the  death  of  the  person  insured  or 
payments  made  by  or  credited  to  the  insured,  on  life 
insurance,  endowment,  or  annuity  contracts,  upon  the 
return  thereof  to  the  insured  at  the  maturity  of  the  term 
mentioned  in  the  contract,  or  upon  surrender  of  the  con- 
tract, shall  not  be  included  as  income. 

That  in  computing  net  income  for  the  purpose  of  the 
normal  tax  there  shall  be  allowed  as  deductions:  First, 
the  necessary  expenses  actually  paid  in  carrying  on  any 
business,  not  including  personal,  living,  or  family  ex- 
penses; second,  all  interest  paid  within  the  year  by  a 
taxable  person  on  indebtedness;  third,  all  national,  State, 
county,  school,  and  municipal  taxes  paid  within  the  year, 
not  including  those  assessed  against  local  benefits;  fourth, 
losses  actually  sustained  during  the  year,  incurred  in 
trade  or  arising  from  fires,  storms,  or  shipwreck,  and  not 


278  APPENDIX  [Act,  Oct.  3, 1913 

compensated  for  by  insurance  or  otherwise;  fifth,  debts 
due  to  the  taxpayer  actually  ascertained  to  be  worthless 
and  charged  off  within  the  year;  sixth,  a  reasonable 
allowance  for  the  exhaustion,  wear  and  tear  of  property 
arising  out  of  its  use  or  employment  in  the  business,  not  to 
exceed,  in  the  case  of  mines,  5  per  centum  of  the  gross  value 
at  the  mine  of  the  output  for  the  year  for  which  the  com- 
putation is  made,  but  no  deduction  shall  be  made  for 
any  amount  of  expense  of  restoring  property  or  making 
good  the  exhaustion  thereof  for  which  an  allowance  is 
or  has  been  made:  Provided,  That  no  deduction  shall  be 
allowed  for  any  amount  paid  out  for  new  buildings, 
permanent  improvements,  or  betterments,  made  to  in- 
crease the  value  of  any  property  or  estate;  seventh,  the 
amount  received  as  dividends  upon  the  stock  or  from  the 
net  earnings  of  any  corporation,  joint  stock  company, 
association,  or  insurance  company  which  is  taxable  upon 
its  net  income  as  hereinafter  provided;  eighth,  the  amount 
of  income,  the  tax  upon  which  has  been  paid  or  withheld 
for  payment  at  the  source  of  the  income,  under  the  provi- 
sions of  this  section,  provided  that  whenever  the  tax  upon 
the  income  of  a  person  is  required  to  be  withheld  and  paid 
at  the  source  as  hereinafter  required,  if  such  annual  income 
does  not  exceed  the  sum  of  $3,000  or  is  not  fixed  or  certain,  * 
or  is  indefinite,  or  irregular  as  to  amount  or  time  of  accrual, 
the  same  shall  not  be  deducted  in  the  personal  return  of 
such  person. 

The  net  income  from  property  owned  and  business 
carried  on  in  the  United  States  by  persons  residing  else- 
where shall  be  computed  upon  the  basis  prescribed  in  this 
paragraph  and  that  part  of  paragraph  G  of  this  section 
relating  to  the  computation  of  the  net  income  of  corpora- 
tions, joint-stock  and  insurance  companies,  organized, 
created,  or  existing  under  the  laws  of  foreign  countries, 
in  so  far  as  appUcable. 

That  in  computing  net  income  under  this  section  there 
shall  be  excluded  the  interest  upon  the  obligations  of  a 


t^EDERAL  INCOME  TAX  ACTS  279 

State  or  any  political  subdivision  thereof,  and  upon  the 
obligations  of  the  United  States  or  its  possessions;  also 
the  compensation  of  the  present  President  of  the  United 
States  during  the  term  for  which  he  has  been  elected,  and 
of  the  judges  of  the  supreme  and  inferior  courts  of  the 
United  States  now  in  office,  and  the  compensation  of  all 
officers  and  employees  of  a  State  or  any  political  subdivi- 
sion thereof  except  when  such  compensation  is  paid  by 
the  United  States  Government. 

C.  That  there  shall  be  deducted  from  the  amount  of  the 
net  income  of  each  of  said  persons,  ascertained  as  provided 
herein,  the  sum  of  $3,000,  plus  $1,000  additional  if  the 
person  making  the  return  be  a  married  man  with  a  wife 
living  with  him,  or  plus  the  sum  of  $1,000  additional  if  the 
person  making  the  return  be  a  married  woman  with  a 
husband  living  with  her;  but  in  no  event  shall  this  addi- 
tional exemption  of  $1,000  be  deducted  by  both  a  husband 
and  a  wife:  Provided,  That  only  one  deduction  of  $4,000 
shall  be  made  from  the  aggregate  income  of  both  husband 
and  wife  when  living  together. 

D.  The  said  tax  shall  be  computed  upon  the  remainder 
of  said  net  income  of  each  person  subject  thereto,  accruing 
during  each  preceding  calendar  year  ending  December 
thirty-first:  Provided,  however.  That  for  the  year  ending 
December  thirty-first,  nineteen  hundred  and  thirteen, 
said  tax  shall  be  computed  on  the  net  income  accruing 
from  March  first  to  December  thirty-first,  nineteen  hun- 
dred and  thirteen,  both  dates  inclusive,  after  deducting 
five-sixths  only  of  the  specific  exemptions  and  deductions 
herein  provided  for. 

On  or  before  the  first  day  of  March,  nineteen  hundred 
and  fourteen,  and  the  first  day  of  March  in  each  year 
thereafter,  a  true  and  accurate  return,  under  oath  or 
affirmation,  shall  be  made  by  each  person  of  lawful  age, 
except  as  hereinafter  provided,  subject  to  the  tax  imposed 
by  this  section,  and  having  a  net  income  of  $3,000  or  over 
the  taxable  year,  to  the  collector  of  internal  revenue  for  the 


280  APPENDIX  [Act,  Oct.  3,  1913 

district  in  which  such  person  resides  or  has  his  principal 
place  of  business,  or,  m  the  case  of  a  person  residing  in  a 
foreign  country,  in  the  place  where  his  principal  business 
is  carried  on  within  the  United  States,  in  such  form 
as  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  shall  prescribe, 
setting  forth  specifically  the  gross  amount  of  income  from 
all  separate  sources  and  from  the  total  thereof,  deducting 
the  aggregate  items  or  expenses  and  allowance  herein 
authorized ;  guardians,  trustees,  executors,  administrators, 
agents,  receivers,  conservators,  and  all  persons,  corpora- 
tions, or  associations  acting  in  any  fiduciary  capacity, 
shall  make  and  render  a  return  of  the  net  income  of  the 
person  for  whom  they  act,  subject  to  this  tax,  coming  into 
their  custody  or  control  and  management,  and  be  subject 
to  all  the  provisions  of  this  section  which  apply  to  in- 
dividuals: Provided,  That  a  return  made  by  one  of  two 
or  more  joint  guardians,  trustees,  executors,  administra- 
tors, agents,  receivers,  and  conservators,  or  other  persons 
acting  in  a  fiduciary  capacity,  filed  in  the  district  where 
such  person  resides,  or  in  the  district  where  the  will  or 
other  instrument  under  which  he  acts  is  recorded,  under 
such  regulations  as  the  Secretary  of  the  Treasury  may 
prescribe,  shall  be  a  sufficient  compliance  with  the  re- 
quirements of  this  paragraph;  and  also  all  persons,  firms, 
companies,  copartnerships,  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies,  except  as 
hereinafter  provided,  in  whatever  capacity  acting,  having 
the  control,  receipt,  disposal,  or  payment  of  fixed  or 
determinable  annual  or  periodical  gains,  profits,  and  in- 
come of  another  person,  subject  to  tax,  shall  in  behalf  of 
such  person  deduct  and  withhold  from  the  payment  an 
amount  equivalent  to  the  normal  income  tax  upon  the 
same  and  make  and  render  a  return,  as  aforesaid,  but 
separate  and  distinct,  of  the  portion  of  the  income  of 
each  person  from  which  the  normal  tax  has  been  thus 
withheld,  and  containing  also  the  name  and  address  of 


FEDERAL  INCOME  TAX  ACTS  281 

such  person  or  stating  that  the  name  and  address  or  the 
address,  as  the  case  may  be,  are  unknown :  Provided,  That 
the  provision  requiring  the  normal  tax  of  individuals  to  be 
withheld  at  the  source  of  the  income  shall  not  be  construed 
to  require  any  of  such  tax  to  be  withheld  prior  to  the  first 
day  of  November,  1913;  Provided,  further.  That  in  either 
case  above  mentioned  no  return  of  income  not  exceeding 
$3,000  shall  be  required :  Provided  further,  That  any  persons 
carrying  on  business  in  partnership  shall  be  liable  for 
income  tax  only  in  their  individual  capacity,  and  the 
share  of  the  profits  of  a  partnership  to  which  any  taxable 
partner  would  be  entitled  if  the  same  were  divided, 
whether  divided  or  otherwise,  shall  be  returned  for  taxa- 
tion and  the  tax  paid,  under  the  provisions  of  this  section, 
and  any  such  firm,  when  requested  by  the  Commissioner 
of  Internal  Revenue,  or  any  district  collector,  shall  for- 
ward to  him  a  correct  statement  of  such  profits  and  the 
names  of  the  individuals  who  would  be  entitled  to  the 
same,  if  distributed :  Provided  further,  That  persons  liable 
for  the  normal  income  tax  only,  on  their  own  account  or  in 
behalf  of  another,  shall  not  be  required  to  make  return 
of  the  income  derived  from  dividends  on  the  capital  stock 
or  from  the  net  earnings  of  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies  taxable 
upon  their  net  income  as  hereinafter  provided. 

Any  person  for  whom  return  has  been  made  and  the 
tax  paid,  or  to  be  paid  as  aforesaid,  shall  not  be  required 
to  make  a  return  unless  such  person  has  other  net  income, 
but  only  one  deduction  of  $3,000  shall  be  made  in  the  case 
of  any  such  person. 

The  collector  or  deputy  collector  shall  require  every 
list  to  be  verified  by  the  oath  or  affirmation  of  the  party 
rendering  it. 

If  the  collector  or  deputy  collector  have  reason  to 
believe  that  the  amount  of  any  income  returned  is  under- 
stated, he  shall  give  due  notice  to  the  person  making  the 
return  to  show  cause  why  the  amount  of  the  return  should 


282  APPENDIX  [Act,  Oct.  3,  1913 

not  be  increased,  and  upon  proof  of  the  amount  under- 
stated may  increase  the  same  accordingly. 

If  dissatisfied  with  the  decision  of  the  collector,  such  person 
may  submit  the  case,  with  all  the  papers,  to  the  Commis- 
sioner of  Internal  Revenue  for  his  decision,  and  may  furnish 
sworn  testimony  of  witnesses  to  prove  any  relevant  facts. 

E.  That  all  assessments  shall  be  made  by  the  Commis- 
sioner of  Internal  Revenue  and  all  persons  shall  be  notified 
of  the  amount  for  which  they  are  respectively  liable  on  or 
before  the  first  day  of  June  of  each  successive  year,  and 
said  assessments  shall  be  paid  on  or  before  the  thirtieth 
day  of  June,  except  in  cases  of  refusal  or  neglect  to  make 
such  return  and  in  cases  of  false  or  fraudulent  returns, 
in  which  cases  the  Commissioner  of  Internal  Revenue 
shall,  upon  the  discovery  thereof,  at  any  time  within  three 
years  after  said  return  is  due,  make  a  return  upon  informa- 
tion obtained  as  provided  for  in  this  section  or  by  existing 
law,  and  the  assessment  made  by  the  Commissioner  of 
Internal  Revenue  thereon  shall  be  paid  by  such  person  or 
persons  immediately  upon  notification  of  the  amount  of 
such  assessment;  and  to  any  sum  or  sums  due  and  unpaid 
after  the  thirtieth  day  of  June  in  any  year,  and  for  ten 
days  after  notice  and  demand  thereof  by  the  collector, 
there  shall  be  added  the  sum  of  5  per  centum  on  the 
amount  of  tax  unpaid,  and  interest  at  the  rate  of  1  per 
centum  per  month  upon  said  tax  from  the  time  the  same 
became  due,  except  from  the  estates  of  insane,  deceased, 
or  insolvent  persons. 

All  persons,  firms,  copartnerships,  companies,  corpora- 
tions, joint-stock  companies  or  associations,  and  insurance 
companies,  in  whatever  capacity  acting,  including  lessees 
or  mortgagors  of  real  or  personal  property,  trustees  acting 
in  any  trust  capacity,  executors,  administrators,  agents,  re- 
ceivers, conservators,  employers,  and  all  officers  and  em- 
ployees of  the  United  States  having  the  control,  receipt, 
custody,  disposal,  or  payment  of  interest,  rent,  salaries, 
wages,  premiums,  annuities,  compensation,  remuneration, 


FEDERAL  INCOME  TAX  ACTS  283 

emoluments,  or  other  fixed  or  determinable  annual  gains, 
profits,  and  income  of  another  person,  exceeding  $3,000  for 
any  taxable  year,  other  than  dividends  on  capital  stock, 
or  from  the  net  earnings  of  corporations  and  joint-stock 
companies  or  associations  subject  to  like  tax,  who  are 
required  to  make  and  render  a  return  in  behalf  of  another, 
as  provided  herein,  to  the  collector  of  his,  her,  or  its  dis- 
trict, are  hereby  authorized  and  required  to  deduct  and 
withhold  from  such  annual  gains,  profits,  and  income  such 
sum  as  will  be  sufficient  to  pay  the  normal  tax  imposed 
thereon  by  this  section,  and  shall  pay  to  the  officer  of  the 
United  States  Government  authorized  to  receive  the 
same,  and  they  are  each  hereby  made  personally  liable  for 
such  tax. 

In  all  cases  where  the  income  tax  of  a  person  is  withheld 
and  deducted  and  paid  or  to  be  paid  at  the  source,  as 
aforesaid,  such  person  shall  not  receive  the  deduction  and 
benefit  of  the  exemption  allowed  in  paragraph  C  of  this 
section  except  by  an  apphcation  for  refund  of  the  tax 
unless  he  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  file  with  the  per- 
son who  is  required  to  withhold  and  pay  tax  for  him,  a 
signed  notice  in  writing  claiming  the  benefit  of  such 
exemption  and  thereupon  no  tax  shall  be  withheld  upon 
the  amount  of  such  exemption:  Provided,  That  if  any 
person  for  the  purpose  of  obtaining  any  allowance  or 
reduction  by  virtue  of  a  claim  for  such  exemption,  either 
for  himself  or  for  any  other  person,  knowingly  makes  any 
false  statement  or  false  or  fraudulent  representation,  he 
shall  be  liable  to  a  penalty  of  $300;  nor  shall  any  person 
under  the  foregoing  conditions  be  allowed  the  benefit  of 
any  deduction  provided  for  in  subsection  B  of  this  section 
unless  he  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due,  either  file  with 
the  person  who  is  required  to  withhold  and  pay  tax  for 
him  a  true  and  correct  return  of  his  annual  gains,  profits, 
and  income  from  all  other  sources,  and  also  the  deductions, 


284  APPENDIX  [Act,  Oct.  3,  1913 

asked  for,  and  the  showing  thus  made  shall  then  become 
a  part  of  the  return  to  be  made  in  his  behalf  by  the  person 
required  to  withhold  and  pay  the  tax,  likewise  make 
application  for  deductions  to  the  collector  of  the  dis- 
trict in  which  return  is  made  or  to  be  made  for  him :  Pro- 
vided further,  That  if  such  person  is  a  minor  or  an  insane 
person,  or  is  absent  from  the  United  States,  or  is  unable 
owing  to  serious  illness  to  make  the  return  and  application 
above  provided  for,  the  return  and  application  may  be 
made  for  him  or  her  by  the  person  required  to  withhold 
and  pay  the  tax,  he  making  oath  under  the  penalties  of 
this  Act  that  he  has  sufficient  knowledge  of  the  affairs 
and  property  of  his  beneficiary  to  enable  him  to  make 
a  full  and  complete  return  for  him  or  her,  and  that  the 
return  and  application  made  by  him  are  full  and  complete: 
Provided  further,  That  the  amount  of  the  normal  tax 
hereinbefore  imposed  shall  be  deducted  and  withheld  from 
fixed  and  determinable  annual  gains,  profits,  and  income 
derived  from  interest  upon  bonds,  and  mortgages,  or  deeds 
of  trust,  or  other  similar  obligations  of  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies, 
whether  payable  annually  or  at  shorter  or  longer  periods, 
although  such  interest  does  not  amount  to  $3,000,  subject 
to  the  provisions  of  this  section  requiring  the  tax  to  be 
withheld  at  the  source  and  deducted  from  annual  income 
and  paid  to  the  Government;  and  likewise  the  amount  of 
such  tax  shall  be  deducted  and  withheld  from  coupons, 
checks,  or  bills  of  exchange  for  or  in  payment  of  interest 
upon  bonds  of  foreign  countries  and  upon  foreign  mort- 
gages or  like  obligations  (not  payable  in  the  United  States), 
and  also  from  coupons,  checks,  or  bills  of  exchange  for 
or  in  payment  of  any  dividends  upon  the  stock  or  interest 
upon  the  obligations  of  foreign  corporations,  associations, 
and  insurance  companies  engaged  in  business  in  foreign 
countries;  and  the  tax  in  each  case  shall  be  withheld  and 
deducted  for  and  in  behalf  of  any  person  subject  to  the 
tax  hereinbefore  imposed,  although  such  interest,  div- 


FEDERAL  INCOME  TAX  ACTS  285 

idends,  or  other  compensation  does  not  exceed  $3,000,  by 
any  banker  or  person  who  shall  sell  or  otherwise  realize 
coupons,  checks,  or  bills  of  exchange  drawn  or  made  in 
payment  of  any  such  interest  or  dividends  (not  payable 
in  the  United  States),  and  any  person  who  shall  obtain 
payment  (not  in  the  United  States),  in  behalf  of  another 
of  such  dividends  and  interest  by  means  of  coupons, 
checks,  or  bills  of  exchange,  and  also  any  dealer  in  such 
coupons  who  shall  purchase  the  same  for  any  such  div- 
idends or  interest  (not  payable  in  the  United  States), 
otherwise  than  from  a  banker  or  another  dealer  in  such 
coupons;  but  in  each  case  the  benefit  of  the  exemption 
and  the  deduction  allowable  under  this  section  may  be 
had  by  complying  with  the  foregoing  provisions  of  this 
paragraph. 

All  persons,  firms,  or  corporations  undertaking  as  a 
matter  of  business  or  for  profit  the  collection  of  foreign 
payments  of  such  interest  or  dividends  by  means  of 
coupons,  checks,  or  bills  of  exchange  shall  obtain  a  license 
from  the  Commissioner  of  Internal  Revenue,  and  shall 
be  subject  to  such  regulations  enabling  the  Government 
to  ascertain  and  verify  the  due  withholding  and  payment 
of  the  income  tax  required  to  be  withheld  and  paid  as  the 
Conmaissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  shall  prescribe;  and  any 
person  who  shall  undertake  to  collect  such  payments  as 
aforesaid  _  without  having  obtained  a  license  therefor,  or 
without  complying  with  such  regulations,  shall  be  deemed 
guilty  of  a  misdemeanor  and  for  each  offense  be  fined  in  a 
sum  not  exceeding  $5,000,  or  imprisoned  for  a  term  not 
exceeding  one  year,  or  both,  in  the  discretion  of  the  court. 

Nothing  in  this  section  shall  be  construed  to  release  a 
taxable  person  from  liability  from  income  tax  nor  shall 
any  contract  entered  into  after  this  Act  takes  effect  be 
valid  in  regard  to  any  Federal  income  tax  imposed  upon 
a  person  liable  to  such  payment. 

The  tax  herein  imposed  upon  annual  gains,  profits,  and 


286  APPENDIX  [Act,  Oct.  3,  1913 

income  not  falling  under  the  foregoing  and  not  returned 
and  paid  by  virtue  of  the  foregoing  shall  be  assessed  by- 
personal  return  under  rules  and  regulations  prescribed  by 
the  Commissioner  of  Internal  Revenue  and  approved  by 
the  Secretary  of  the  Treasury. 

The  provisions  of  this  section  relating  to  the  deduction  > 
and  payment  of  the  tax  at  the  source  of  income  shall  only 
apply  to  the  normal  tax  hereinbefore  imposed  upon  indi- 
viduals. 

F.  That  if  any  person,  corporation,  joint-stock  com- 
pany, association,  or  insurance  company  liable  to  make 
the  return  or  pay  the  tax  aforesaid  shall  refuse  or  neglect 
to  make  a  return  at  the  time  or  times  hereinbefore  specified 
in  each  year,  such  persons  shall  be  liable  to  a  penalty 
of  not  less  than  $20  nor  more  than  $1,000. 

Any  person  or  any  officer  of  any  corporation  required 
by  law  to  make,  render,  sign,  or  verify  any  return  who 
makes  any  false  or  fraudulent  return  or  statement  with 
intent  to  defeat  or  evade  the  assessment  required  by  this 
section  to  be  made  shall  be  guilty  of  a  misdemeanor,  and 
shall  be  fined  not  exceeding  $2,000  or  be  imprisoned  not 
exceeding  one  year,  or  both,  at  the  discretion  of  the  court, 
with  the  costs  of  prosecution. 

G.  That  the  normal  tax  hereinbefore  imposed  upon 
individuals  likewise  shall  be  levied,  assessed,  and  paid 
annually  upon  the  entire  net  income  arising  or  accruing 
from  all  sources  during  the  preceding  calendar  year  to 
every  corporation,  joint-stock  company  or  association, 
and  every  insurance  company,  organized  in  the  United 
States,  no  matter  how  created  or  organized,  but  not  in- 
cluding partnerships;  but  if  organized,  authorized,  or 
existing  under  the  laws  of  any  foreign  country,  then 
upon  the  amount  of  net  income  accruing  from  business 
transacted  and  capital  invested  within  the  United  States 
during  such  year. 

Provided,  however,  That  nothing  in  this  section  shall 
apply  to  labor,  agricultural,  or  horticultural  organizations, 


FEDERAL  INCOME  TAX  ACTS  287 

or  to  mutual  savings  banks  not  having  a  capital  stock 
represented  by  shares,  or  to  fraternal  beneficiary  societies, 
orders,  or  associations  operating  under  the  lodge  system, 
or  for  the  exclusive  benefit  of  the  members  of  a  fraternity 
itself  operating  under  the  lodge  system  and  providing 
for  the  payment  of  life,  sick,  accident,  and  other  benefits 
to  the  members  of  such  societies,  orders,  or  associations 
and  dependents  of  such  members,  nor  to  domestic  building 
and  loan  associations,  nor  to  cemetery  companies,  organ- 
ized and  operated  exclusively  for  the  mutual  benefit  of 
their  members,  nor  to  any  coi-poration  or  association  or- 
ganized and  operated  exclusively  for  religious,  charitable, 
scientific,  or  educational  purposes,  no  part  of  the  net  in- 
come of  which  inures  to  the  benefit  of  any  private  stock- 
holder or  individual,  nor  to  business  leagues,  nor  to 
chambers  of  commerce  or  boards  of  trade,  not  organized 
for  profit  or  no  part  of  the  net  income  of  which  inures  to 
the  benefit  of  the  private  stockholder  or  individual;  nor 
to  any  civic  league  or  organization  not  organized  for 
profit,  but  operated  exclusively  for  the  promotion  of 
social  welfare.  Provided  further,  That  there  shall  not  be 
taxed  under  this  section  any  income  derived  from  any 
public  utility  or  from  the  exercise  of  any  essential  gov- 
ernmental function  accruing  to  any  State,  Territory,  or 
the  District  of  Columbia,  or  any  poUtical  subdivision 
of  the  State,  Territory,  or  the  District  of  Columbia,  nor 
any  income  accruing  to  the  government  of  the  Philippine 
Islands  or  Porto  Rico,  or  of  any  political  subdivision  of 
the  Philippine  Islands  or  Porto  Rico:  Provided,  That 
whenever  any  State,  Territory,  or  the  District  of  Co- 
lumbia, or  any  political  subdivision  of  the  State  or  Ter- 
ritory, has,  prior  to  the  passage  of  this  Act,  entered 
in  good  faith  into  a  contract  with  any  person  or  cor- 
poration, the  object  and  purpose  of  which  is  to  acquire, 
construct,  operate,  or  maintain  a  public  utility,  no  tax 
shall  be  levied  under  the  provisions  of  this  Act  upon 
the  income  derived  from  the  operation  of  such  public 


288  APPENDIX  *[Act,  Oct.  3,  1913 

utility,  so  far  as  the  payment  thereof  will  impose  a  loss 
or  burden  upon  such  State,  Territory,  or  the  District  of 
Columbia,  or  a  political  subdivision  of  a  State  or  Ter- 
ritory; but  this  provision  is  not  intended  to  confer  upon 
such  person  or  corporation  any  financial  gain  or  exemption 
or  to  relieve  such  person  or  corporation  from  the  payment 
of  a  tax  as  provided  for  in  this  section  upon  the  part  or 
portion  of  the  said  income  to  which  such  person  or  corpo- 
ration shall  be  entitled  under  such  contract. 

(6)  Such  net  income  shall  be  ascertained  by  deducting 
from  the  gross  amount  of  the  income  of  such  corporation, 
joint-stock  company  or  association,  or  insurance  company, 
received  within  the  year  from  all  sources,  (first)  all  the 
ordinary  and  necessary  expenses  paid  within  the  year  in 
the  maintenance  and  operation  of  its  business  and  prop- 
erties, including  rentals  or  other  payments  required  to  be 
made  as  a  condition  to  the  continued  use  or  possession  of 
property;  (second)  all  losses  actually  sustained  within  the 
year  and  not  compensated  by  insurance  or  otherwise, 
including  a  reasonable  allowance  for  depreciation  by 
use,  wear  and  tear  of  property,  if  any;  and  in  the  case  of 
mines  a  reasonable  allowance  for  depletion  of  ores  and  all 
other  natural  deposits  not  to  exceed  5  per  centum  of  the 
gross  value  at  the  mine  of  the  output  for  the  year  for  which 
the  computation  is  made;  and  in  case  of  insurance  com- 
panies the  net  addition,  if  any,  required  by  law  to  be  made 
within  the  year  to  reserve  funds  and  the  sums  other  than 
dividends  paid  within  the  year  on  policy  and  annuity 
contracts:  Provided,  That  mutual  fire  insurance  com- 
panies requiring  their  members  to  make  premium  de- 
posits to  provide  for  losses  and  expenses  shall  not  return 
as  income  any  portion  of  the  premium  deposits  returned 
to  their  policy  holders,  but  shall  return  as  taxable  income 
all  income  received  by  them  from  all  other  sources  plus 
such  portions  of  the  premium  deposits  as  are  retained  by 
the  companies  for  purposes  other  than  the  payment  of 
losses  and  expenses  and  reinsurance  reserves:  Provided 


FEDERAL   INCOME   TAX   ACTS  289 

further,  That  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gross  income  gross  premiums 
collected  and  received  by  them  less  amounts  paid  for 
reinsurance,  but  shall  be  entitled  to  include  in  deductions 
from  gross  income  amounts  repaid  to  policy  holders  on 
account  of  premiums  previously  paid  by  them  and  interest 
paid  upon  such  amounts  between  the  ascertainment 
thereof  and  the  payment  thereof;  and  life  insurance  com- 
panies shall  not  include  as  income  in  any  year  such  por- 
tion of  any  actual  premium  received  from  any  individual 
policy  holder  as  shall  have  been  paid  back  or  credited  to 
such  individual  policy  holder,  or  treated  as  an  abatement 
of  premium  of  such  individual  policy  holder,  within  such 
year;  (third)  the  amount  of  interest  accrued  and  paid 
within  the  year  on  its  indebtedness  to  an  amount  of  such 
indebtedness  not  exceeding  one-half  of  the  sum  of  its 
interest-bearing  indebtedness  and  its  paid-up  capital 
stock  outstanding  at  the  close  of  the  year,  or  if  no  capital 
stock,  the  amount  of  interest  paid  within  the  year  on  an 
amount  of  its  indebtedness  not  exceeding  the  amount  of 
capital  employed  in  the  business  at  the  close  of  the  year: 
Provided,  That  in  case  of  indebtedness  wholly  secured  by 
collateral  the  subject  of  sale  in  ordinary  business  of  such 
corporation,  joint  stock  company,  or  association,  the  total 
interest  secured  and  paid  by  such  company,  corporation, 
or  association  within  the  year  on  any  such  indebtedness 
may  be  deducted  as  a  part  of  its  expense  of  doing  business : 
Provided  further.  That  in  the  case  of  bonds  or  other 
indebtedness,  which  have  been  issued  with  a  guaranty 
that  the  interest  payable  thereon  shall  be  free  from  taxa- 
tion, no  deduction  for  the  payment  of  the  tax  herein  im- 
posed shall  be  allowed;  and  in  the  case  of  a  bank,  banking 
association,  loan,  or  trust  company,  interest  paid  within 
the  year  on  deposits  or  on  moneys  received  for  investment 
and  secured  by  interest-bearing  certificates  of  indebted- 
ness issued  by  such  bank,  banking  association,  loan  or 
trust  company;  (fourth)  all  sums  paid  by  it  within  the 


290  APPENliix  [Act,  Oct.  3,  1913 

year  for  taxes  imposed  under  the  authority  of  the  United 
States  or  of  any  State  or  Territory  thereof,  or  imposed  by 
the  Government  of  any  foreign  country, — 

Provided,  That  in  the  case  of  a  corporation,  joint-stock 
company  or  association,  or  insurance  company,  organized, 
authorized,  or  existing  under  the  laws  of  any  foreign 
country,  such  net  income  shall  be  ascertained  by  deducting 
from  the  gross  amount  of  its  income  accrued  within  the 
year  from  business  transacted  and  capital  invested  within 
the  United  States,  (first)  all  the  ordinary  and  necessary 
expenses  actually  paid  within  the  year  out  of  earnings  in 
the  maintenance  and  operation  of  its  business  and  prop- 
erty within  the  United  States,  including  rentals  or  other 
payments  required  to  be  made  as  a  condition  to  the  con- 
tinued use  or  possession  of  property;  (second)  all  losses 
actually  sustained  within  the  year  in  business  conducted 
by  it  within  the  United  States  and  not  compensated  by 
insurance  or  otherwise,  including  a  reasonable  allowance 
for  depreciation  by  use,  wear  and  tear  of  property,  if  any, 
and  in  the  case  of  mines  a  reasonable  allowance  for  deple- 
tion of  ores  and  all  other  natural  deposits,  not  to  exceed 
5  per  centum  of  the  gross  value  at  the  mine  of  the  output 
for  the  year  for  which  the  computation  is  made;  and  in 
case  of  insurance  companies,  the  net  addition  if  any,  re- 
quired by  law  to  be  made  within  the  year  to  reserve  funds 
and  the  sums  other  than  dividends  paid  within  the  year  on 
policy  and  annuity  contracts.  Provided  further,  That 
mutual  fire  insurance  companies  requiring  their  menibers 
to  make  premium  deposits  to  provide  for  losses  and  ex- 
penses shall  not  return  as  income  any  portion  of  the  pre- 
mium deposits  returned  to  their  policy  holders,  but  shall 
return  as  taxable  income  all  income  received  by  them  from 
all  other  sources  plus  such  portions  of  the  premium  de- 
posits as  are  retained  by  the  companies  for  pmposes  other 
than  the  payment  of  losses  and  expenses  and  reinsurance 
reserves:  Provided  further,  That  mutual  marine  insur- 
ance companies  shall  include  in  their  return  of  gross  in- 


FEDERAL  INCOME  TAX  ACTS  291 

come  gross  premiums  collected  and  received  by  them  less 
amounts  paid  for  reinsurance,  but  shall  be  entitled  to 
include  in  deductions  from  gross  income  amounts  repaid 
to  policy  holders  on  account  of  premiums  previously  paid 
by  them,  and  interest  paid  upon  such  amounts  between 
the  ascertainment  thereof  and  the  payment  thereof;  and 
life  insurance  companies  shall  not  include  as  income  in 
any  year  such  portion  of  any  actual  premium  received 
from  any  individual  policy  holder  as  shall  have  been  paid 
back  or  credited  to  such  individual  policy  holder,  or 
treated  as  an  abatement  of  premium  of  such  individual 
policy  holder,  within  such  year;  (third)  the  amount  of 
interest  accrued  and  paid  within  the  year  on  its  indebted- 
ness to  an  amount  of  such  indebtedness  not  exceeding  the 
proportion  of  one-half  of  the  sum  of  its  interest-bearing 
indebtedness  and  its  paid-up  capital  stock  outstanding  at 
the  close  of  the  year,  or  if  no  capital  stock,  the  capital 
employed  in  the  business  at  the  close  of  the  year  which 
the  gross  amount  of  its  income  for  the  year  from  business 
transacted  and  capital  invested  within  the  United  States 
bears  to  the  gross  amount  of  its  income  derived  from  all 
sources  within  and  without  the  United  States: 

Provided,  That  in  the  case  of  bonds  or  other  indebted- 
ness which  have  been  issued  with  a  guaranty  that  the 
interest  payable  thereon  shall  be  free  from  taxation,  no 
deduction  for  the  payment  of  the  tax  herein  imposed  shall 
be  allowed;  (fourth)  all  sums  paid  by  it  within  the  year 
for  taxes  imposed  under  the  authority  of  the  United  States 
or  of  any  State,  or  Territory  thereof  or  the  District  of 
Columbia.  In  the  case  of  assessment  insurance  companies, 
whether  domestic  or  foreign,  the  actual  deposit  of  sums 
with  State  or  Territorial  officers,  pursuant  to  law,  as 
additions  to  guarantee  or  reserve  funds  shall  be  treated 
as  being  payments  required  by  law  to  reserve  funds. 

(c)  The  tax  herein  imposed  shall  be  computed  upon 
its  entire  net  income  accruing  during  each  preceding 
calendar   year   ending   December   thirty-first:   Provided, 


292  APPENDIX  [Act,  Oct,  3,  1913 

however,  That  for  the  year  ending  December  thirty-first, 
nineteen  hundred  and  thirteen,  said  tax  shall  be  imposed 
upon  its  entire  net  income  accruing  during  that  portion 
of  said  year  from  March  first  to  December  thirty-first, 
both  dates  inclusive,  to  be  ascertained  by  taking  five- 
sixths  of  its  entire  net  income  for  said  calendar  year: 
Provided,  further,  That  any  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  subject  to  this 
tax  may  designate  the  last  day  of  any  month  in  the  year 
as  the  day  of  the  closing  of  its  fiscal  year  and  shall  be 
entitled  to  have  the  tax  payable  by  it  computed  upon  the 
basis  of  the  net  income  ascertained  as  herein  provided  for 
the  year  ending  on  the  day  so  designated  in  the  year 
preceding  the  date  of  assessment  instead  of  upon  the  basis 
of  the  net  income  for  the  calendar  year  preceding  the  date 
of  assessment;  and  it  shall  give  notice  of  the  day  it  has 
thus  designated  as  the  closing  of  its  fiscal  year  to  the 
collector  of  the  district  in  which  its  principal  business 
office  is  located  at  any  time  not  less  than  thirty  days  prior 
to  the  date  upon  which  its  annual  return  shall  be  filed. 

All  corporations,  joint-stock  companies  or  associations, 
and  insurance  companies  subject  to  the  tax  herein  im- 
posed, computing  taxes  upon  the  income  of  the  calendar 
year,  shall,  on  or  before  the  first  day  of  March,  nineteen 
hundred  and  fourteen,  and  the  first  day  of  March  in  each 
year  thereafter,  and  all  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies,  com- 
puting taxes  upon  the  income  of  a  fiscal  year  which  it 
may  designate  in  the  manner  hereinbefore  provided,  shall 
render  a  hke  return  within  sixty  days  after  the  close  of  its 
said  fiscal  year,  and  within  sixty  days  after  the  close  of  its 
fiscal  year  in  each  year  thereafter,  or  in  the  case  of  a 
corporation,  joint-stock  company  or  association,  or  in- 
surance company,  organized  or  existing  under  the  laws 
of  a  foreign  country,  in  the  place  where  its  principal  busi- 
ness is  located  within  the  United  States,  in  such  form  as 
the  Commissioner  of  Internal  Revenue,  with  the  approval 


.  FEDERAL  INCOME  TAX  ACTS  293 

of  the  Secretary  of  the  Treasury,  shall  prescribe,  shall 
render  a  true  and  accurate  return  under  oath  or  affirma- 
tion of  its  president,  vice  president,  or  other  principal 
officer,  and  its  treasurer  or  assistant  treasurer,  to  the 
collector  of  internal  revenue  for  the  district  in  which  it  has 
its  principal  place  of  business,  setting  forth  (first)  the 
total  amount  of  its  paid-up  capital  stock  outstanding, 
or  if  no  capital  stock,  its  capital  employed  in  business,  at 
the  close  of  the  year;  (second)  the  total  amount  of  its 
bonded  and  other  indebtedness  at  the  close  of  the  year; 
(third)  the  gross  amount  of  its  income,  received  during 
such  year  from  all  sources,  and  if  organized  under  the 
laws  of  a  foreign  country  the  gross  amount  of  its  income 
received  within  the  year  from  business  transacted  and 
capital  invested  within  the  United  States;  (fourth)  the 
total  amount  of  all  of  its  ordinary  and  necessary  expenses 
paid  out  of  earnings  in  the  maintenance  and  operation  of 
the  business  and  properties  of  such  corporation,  joint- 
stock  company  or  association,  or  insurance  company 
within  the  year,  stating  separately  all  rentals  or  other 
payments  required  to  be  made  as  a  condition  to  the  con- 
tinued use  or  possession  of  property,  and  if  organized 
under  the  laws  of  a  foreign  country  the  amount  so  paid 
in  the  maintenance  and  operation  of  its  business  within 
the  United  States;  (fifth)  the  total  amount  of  all  losses 
actually  sustained  during  the  year  and  not  compensated 
by  insurance  or  otherwise,  stating  separately  any  amounts 
allowed  for  depreciation  of  property,  and  in  case  of 
insurance  companies  the  net  addition,  if  any,  required  by 
law  to  be  made  within  the  year  to  reserve  funds  and  the 
sums  other  than  dividends  paid  within  the  year  on  policy 
and  annuity  contracts:  Provided  further,  That  mutual  fire 
insurance  companies  requiring  their  members  to  make 
premium  deposits  to  provide  for  losses  and  expenses  shall 
not  return  as  income  any  portion  of  the  premium  deposits 
returned  to  their  policy  holders,  but  shall  return  as  taxable 
income  all  income  received  by  them  from  all  other  sources 


294  APPENDIX  [Act,  Oct.  3,  1913 

plus  such  portions  of  the  premium  deposits  as  are  retained 
by  the  companies  for  purposes  other  than  the  payment  of 
losses  and  expenses  and  reinsurance  reserves:  Provided 
further,  That  mutual  marine  insurance  companies  shall 
include  in  their  return  of  gross  income  gross  premiums 
collected  and  received  by  them  less  amounts  paid  for 
reinsurance,  but  shall  be  entitled  to  include  in  the  deduc- 
tions from  gross  income  amounts  repaid  to  policy  holders 
on  account  of  premiums  previously  paid  by  them,  and 
interest  paid  upon  such  amounts  between  the  ascertain- 
ment thereof  and  the  payment  thereof  and  life  insurance 
companies  shall  not  include  as  income  in  any  year  such 
portion  of  any  actual  premium  received  from  any  individ- 
ual poUcy  holder  as  shall  have  been  paid  back  or  credited 
to  such  individual  policy  holder  or  treated  as  an  abatement 
of  premium  of  such  individual  policy  holder,  within  such 
year;  and  in  case  of  a  corporation,  joint-stock  company  or 
association,  or  insurance  company,  organized  under  the 
laws  of  a  foreign  country,  all  losses  actually  sustained  by  it 
during  the  year  in  business  conducted  by  it  within  the 
United  States,  not  compensated  by  insurance  or  otherwise, 
stating  separately  any  amounts  allowed  for  depreciation 
of  property,  and  in  case  of  insurance  companies  the  net 
addition,  if  any,  required  by  law  to  be  made  within  the 
year  to  reserve  funds  and  the  sums  other  than  dividends 
paid  within  the  year  on  policy  and  annuity  contracts: 
Provided  further,  That  mutual  fire  insurance  companies 
requiring  their  members  to  make  premium  deposits  to 
provide  for  losses  and  expenses  shall  not  return  as  income 
any  portion  of  the  premium  deposits  returned  to  their 
policy  holders,  but  shall  return  as  taxable  income  all  in- 
come received  by  them  from  all  other  sources  plus  such 
portions  of  the  premium  deposits  as  are  retained  by  the 
companies  for  purposes  other  than  the  payment  of  losses 
and  expenses  and  reinsurance  reserves:  Protdded  further, 
That  mutual  marine  insurance  companies  shall  include  in 
their  return  of  gross  income  gross  premiums  collected  and 


FEDERAL  INCOME  TAX  ACTS  295 

received  by  them  less  amounts  paid  for  reinsurance,  but 
shall  be  entitled  to  include  in  deductions  from  gross  income 
amounts  repaid  to  policy  holders  on  account  of  premiums 
pre\dously  paid  by  them  and  interest  paid  upon  such 
amounts  between  the  ascertainment  thereof  and  the  pay- 
ment thereof  and  life  insurance  companies  shall  not  in- 
clude as  income  in  any  year  such  portion  of  any  actual 
premium  received  from  any  individual  policy  holder  as 
shall  have  been  paid  back  or  credited  to  such  individual 
policy  holder,  or  treated  as  an  abatement  of  premium  of 
such  individual  policy  holder,  within  such  year;  (sixth) 
the  amount  of  interest  accrued  and  paid  within  the  year 
on  its  bonded  or  other  indebtedness  not  exceeding  one-half 
of  the  sum  of  its  interest-bearing  indebtedness  and  its 
paid-up  capital  stock,  outstanding  at  the  close  of  the  year, 
or  if  no  capital  stock,  the  amount  of  interest  paid  within 
the  year  on  an  amount  of  indebtedness  not  exceeding  the 
amount  of  capital  employed  in  the  business  at  the  close 
of  the  year,  and  in  the  case  of  a  bank,  banking  association, 
or  trust  company,  stating  separately  all  interest  paid  by 
it  within  the  year  on  deposits;  or  in  case  of  a  corporation, 
joint-stock  company  or  association,  or  insurance  company, 
organized  under  the  laws  of  a  foreign  country,  interest  so 
paid  on  its  bonded  or  other  indebtedness  to  an  amount  of 
such  bonded  or  other  indebtedness  not  exceeding  the 
proportion  of  its  paid-up  capital  stock  outstanding  at  the 
close  of  the  year,  or  if  no  capital  stock,  the  amount  of 
capital  employed  in  the  business  at  the  close  of  the  year, 
which  the  gross  amount  of  its  income  for  the  year  from 
business  transacted  and  capital  invested  within  the  United 
States  bears  to  the  gross  amount  of  its  income  derived 
from  all  sources  within  and  without  the  United  States; 
(seventh)  the  amount  paid  by  it  within  the  year  for  taxes 
imposed  under  the  authority  of  the  United  States  and 
separately  the  amount  so  paid  by  it  for  taxes  imposed  by 
the  Government  of  any  foreign  country;  (eighth)  the  net 
income    of    such    corporation,    joint-stock    company    or 


296  APPENDIX  [Act,  Oct.  3,  1913 

association,  or  insurance  company,  after  making  the 
deductions  in  this  subsection  authorized. 

All  such  returns  shall  as  received  be  transmitted  forth- 
with by  the  collector  to  the  Commissioner  of  Internal 
Revenue. 

All  assessments  shall  be  made  and  the  several  corpora- 
tions, joint-stock  companies  or  associations,  and  insurance 
companies  shall  be  notified  of  the  amount  for  which  they 
are  respectively  liable  on  or  before  the  first  day  of  June  of 
each  successive  year,  and  said  assessment  shall  be  paid  on 
or  before  the  thirtieth  day  of  June:  Provided,  That  every 
corporation,  joint-stock  company  or  association,  and 
insurance  company,  computing  taxes  upon  the  income  of 
the  fiscal  year  which  it  may  designate  in  the  manner 
hereinbefore  provided,  shall  pay  the  taxes  due  under  its 
assessment  within  one  hundred  and  twenty  days  after 
the  date  upon  which  it  is  required  to  file  its  list  or  return 
of  income  for  assessment;  except  in  cases  of  refusal  or 
neglect  to  make  such  return,  and  in  cases  of  false  or 
fraudulent  returns,  in  which  cases  the  Commissioner  of 
Internal  Revenue  shall,  upon  the  discovery  thereof,  at 
any  time  within  three  years  after  said  return  is  due,  make 
a  return  upon  information  obtained  as  provided  for  in 
this  section  or  by  existing  law,  and  the  assessment  made 
by  the  Commissioner  of  Internal  Revenue  thereon  shall 
be  paid  by  such  corporation,  joint-stock  company  or 
association,  or  insurance  company  immediately  upon 
notification  of  the  amount  of  such  assessment ;  and  to  any 
sum  or  sums  due  and  unpaid  after  the  thirtieth  day  of 
June  in  any  year,  or  after  one  hundred  and  twenty  days 
from  the  date  on  which  the  return  of  income  is  required  to 
be  made  by  the  taxpayer,  and  after  ten  days  notice  and 
demand  thereof  by  the  collector,  there  shall  be  added  the 
sum  of  5  per  centum  on  the  amount  of  tax  unpaid  and 
interest  at  the  rate  of  1  per  centum  per  month  upon  said 
tax  from  the  time  the  same  becomes  due. 

{d)  When  the  assessment  shall  be  made,  as  provided  in 


TEDERAL  INCOME  TAX  ACTS  297 

this  section,  the  returns,  together  with  any  corrections 
thereof  which  may  have  been  made  by  the  conmiissioner, 
shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open 
to  inspection  as  such:  Provided,  That  any  and  all  such 
returns  shall  be  open  to  inspection  only  upon  the  order  of 
the  President,  under  rules  and  regulations  to  be  prescribed 
by  the  Secretary  of  the  Treasury  and  approved  by  the 
President:  Provided  further,  That  the  proper  officers  of 
any  State  imposing  a  general  income  tax  may,  upon  the 
request  of  the  governor  thereof,  have  access  to  said  returns 
or  to  an  abstract  thereof,  showing  the  name  and  income 
of  each  such  corporation,  joint-stock  company,  association 
or  insurance  company,  at  such  times  and  in  such  manner 
as  the  Secretary  of  the  Treasury  may  prescribe. 

If  any  of  the  corporations,  joint-stock  companies  or 
associations,  or  insurance  companies  aforesaid,  shall 
refuse  or  neglect  to  make  a  return  at  the  time  or  times 
hereinbefore  specified  in  each  year,  or  shall  render  a  false 
or  fraudulent  return,  such  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  shall  be  liable 
to  a  penalty  of  not  exceeding  $10,000. 

H.  That  the  word  ''State"  or  ''United  States"  when 
used  in  this  section  shall  be  construed  to  include  any  Ter- 
ritory, Alaska,  the  District  of  Columbia,  Porto  Rico,  and 
the  Philippine  Islands,  when  such  construction  is  necessary 
to  carry  out  its  provisions. 

I.  That  sections  thirty-one  hundred  and  sixty-seven, 
thirty-one  hundred  and  seventy-two,  thirty-one  hundred 
and  seventy-three,  and  thirty-one  hundred  and  seventy- 
six  of  the  Revised  Statutes  of  the  United    States   as 
amended  are  hereby  amended  so  as  to  read  as  follows: 
Sec.  3167.  (See  Revised  Statutes,  p.  120.) 
Sec.  3172.  (See  Revised  Statutes,  p.  121.) 
Sec.  3173.  (See  Revised  Statutes,  p.  121.) 
Sec.  3176.  (See  Revised  Statutes,  p.  126.) 
J.  That  it  shall  be  the  duty  of  every  collector  of  inter- 


298  APPENDIX  [Act,  Oct.  3,  1913 

nal  revenue,  to  whom  any  payment  of  any  taxes  other 
than  the  tax  represented  by  an  adhesive  stamp  or  other 
engraved  stamp  is  made  under  the  provisions  of  this 
section,  to  give  to  the  person  making  such  payment  a  full 
written  or  printed  receipt,  expressing  the  amount  paid  and 
the  particular  account  for  which  such  payment  was  made ; 
and  whenever  such  payment  is  made  such  collector  shall, 
if  required,  give  a  separate  receipt  for  each  tax  paid  by 
any  debtor,  on  account  of  payments  made  to  or  to  be 
made  by  him  to  separate  creditors  in  such  form  that  such 
debtor  can  conveniently  produce  the  same  separately 
to  his  several  creditors  in  satisfaction  of  their  respective 
demands  to  the  amoimts  specified  in  such  receipts;  and 
such  receipts  shall  be  sufficient  evidence  in  favor  of  such 
debtor  to  justify  him  in  withholding  the  amount  therein 
expressed  from  his  next  payment  to  his  creditor,  but  such 
creditor  may,  upon  giving  to  his  debtor  a  full  written 
receipt,  acknowledging  the  payment  to  him  of  whatever 
sum  may  be  actually  paid,  and  accepting  the  amount  of 
tax  paid  as  aforesaid  (specifying  the  same)  as  a  further 
satisfaction  of  the  debt  to  that  amount,  require  the  sur- 
render to  him  of  such  collector's  receipt. 

K.  That  jurisdiction  is  hereby  conferred  upon  the  dis- 
trict courts  of  the  United  States  for  the  district  within 
which  any  person  summoned  under  this  section  to  appear 
to  testify  or  to  produce  books  shall  reside,  to  compel  such 
attendance,  production  of  books,  and  testimony  by 
appropriate  process. 

L.  That  all  administrative,  special,  and  general  pro- 
visions of  law,  including  the  laws  in  relation  to  the  as- 
sessment, remission,  collection,  and  refund  of  internal- 
revenue  taxes  not  heretofore  specifically  repealed  and  not 
inconsistent  with  the  provisions  of  this  section,  are  hereby 
extended  and  made  applicable  to  all  the  provisions  of  this 
section  and  to  the  tax  herein  imposed. 

M.  That  the  provisions  of  this  section  shall  extend  to 
Porto  Rico  and  the  PhiUppine  Islands:  Provided,  That  the 


FEDERAL  INCOME  TAX  ACTS  299 

administration  of  the  law  and  the  collection  of  the  taxes 
imposed  in  Porto  Rico  and  the  Philippine  Islands  shall  be 
by  the  appropriate  internal-revenue  officers  of  those  gov- 
ernments, and  all  revenues  collected  in  Porto  Rico  and  the 
Philippine  Islands  thereunder  shall  accrue  intact  to  the 
general  governments  thereof,  respectively:  And  provided 
further,  That  the  jurisdiction  in  this  section  conferred 
upon  the  district  courts  of  the  United  States  shall,  so  far 
as  the  Philippine  Islands  are  concerned,  be  vested  in  the 
courts  of  the  first  instance  of  said  islands:  And  provided 
further,  That  nothing  in  this  section  shall  be  held  to  ex- 
clude from  the  computation  of  the  net  income  the  com- 
pensation paid  any  official  by  the  governments  of  the 
District  of  Columbia,  Porto  Rico,  and  the  Philippine 
Islands  or  the  political  subdivisions  thereof. 
(See  pp.  120,  121,  126) 

S.  That,  except  as  hereinafter  provided,  sections  one  to 
forty-two,  both  inclusive,  of  an  Act  entitled  "An  Act  to 
provide  revenue,  equalize  duties,  and  encourage  the  in- 
dustries of  the  United  States,  and  for  other  purposes," 
approved  August  fifth,  nineteen  hundred  and  nine,  and 
all  Acts  and  parts  of  Acts  inconsistent  with  the  provisions 
of  this  Act,  are  hereby  repealed :  Provided,  That  nothing  in 
this  Act  shall  be  construed  to  permit  any  oaths  to  be 
demanded  or  fees  to  be  charged  except  as  provided  in  this 
Act  or  in  section  twenty-eight  hundred  and  sixty-two  of 
the  Revised  Statutes  of  the  United  States.  *  *  *  Pro- 
vided further,  That  all  excise  taxes  upon  corporations 
imposed  by  section  thirty-eight,  that  have  accrued  or 
have  been  imposed  for  the  year  ending  December  thirty- 
first,  nineteen  hundred  and  twelve,  shall  be  returned,  as- 
sessed, and  collected  in  the  same  manner,  and  under 
the  same  provisions,  liens,  and  penalties  as  if  section 
thirty-eight  continued  in  full  force  and  effect:  And  pro- 
mded  further,  That  a  special  excise  tax  with  respect  to  the 
carrying  on  or  the  doing  of  business,  equivalent  to  1 


300  APPENDIX  [Act,  Oct.  3,  1913 

per  centum  upon  their  entire  net  income,  shall  be  levied, 
assessed,  and  collected  upon  corporations,  joint  stock 
companies,  or  associations,  and  insurance  companies,  of 
the  character  described  in  section  thirty-eight  of  the  Act 
of  August  fifth,  nineteen  hundred  and  nine,  for  the  period 
from  January  first  to  February  twenty-eighth,  nineteen 
hundred  and  thirteen,  both  dates  inclusive,  which  said 
tax  shall  be  computed  upon  one-sixth  of  the  entire  net 
income  of  said  corporations,  joint  stock  companies  or 
associations,  and  insurance  companies,  for  said  year,  said 
net  income  to  be  ascertained  in  accordance  with  the  pro- 
visions of  subsection  G  of  section  two  of  this  Act:  Provided 
further,  That  the  provisions  of  said  section  thirty-eight  of 
the  Act  of  August  fifth,  nineteen  hundred  and  nine,  rela- 
tive to  the  collection  of  the  tax  therein  imposed  shall  re- 
main in  force  for  the  collection  of  the  excise  tax  herein 
provided,  but  for  the  year  nineteen  hundred  and  thirteen 
it  shall  not  be  necessary  to  make  more  than  one  return  and 
assessment  for  all  the  taxes  imposed  herein  upon  said 
corporations,  joint  stock  companies  or  associations,  and 
insurance  companies,  either  by  way  of  income  or  excise, 
which  return  and  assessment  shall  be  made  at  the  times 
and  in  the  manner  provided  in  this  Act;  but  the  repeal  of 
existing  laws  or  modifications  thereof  embraced  in  this 
Act  shall  not  affect  any  act  done,  or  any  right  accruing  or 
accrued,  or  any  suit  or  proceeding  had  or  commenced  in 
any  civil  case  before  the  said  repeal  or  modification;  but 
all  rights  and  liabilities  under  said  laws  shall  continue  and 
may  be  enforced  in  the  same  manner  as  if  said  repeal  or 
modifications  had  not  been  made.  Any  offenses  com- 
mitted and  all  penalties  or  forfeitures  or  liabilities  incurred 
prior  to  the  passage  of  this  Act  under  any  statute  embraced 
in  or  changed,  modified,  or  repealed  by  this  Act  may  be 
prosecuted  or  punished  in  the  same  manner  and  with  the 
same  effect  as  if  this  Act  had  not  been  passed.  No  Acts 
of  limitation  now  in  force,  whether  applicable  to  civil 
causes  and  proceedings  or  to  the  prosecution  of  offenses 


FEDERAL  INCOME  TAX  ACTS  301 

or  for  the  recovery  of  penalties  or  forfeitures  embraced  in 
or  modified,  changed,  or  repealed  by  this  Act  shall  be 
affected  thereby,  so  far  as  they  affect  any  suits,  proceed- 
ings, or  prosecutions,  whether  civil  or  criminal,  for  causes 
arising  or  acts  done  or  committed  prior  to  the  passage 
of  this  Act,  which  may  be  commenced  and  prosecuted 
within  the  same  time  and  with  the  same  effect  as  if  this 
Act  had  not  been  passed. 

T.  If  any  clause,  sentence,  paragraph,  or  part  of  this 
Act  shall  for  any  reason  be  adjudged  by  any  court  of  com- 
petent jurisdiction  to  be  invalid,  such  judgment  shall  not 
affect,  impair,  or  invalidate  the  remainder  of  said  Act,  but 
shall  be  confined  in  its  operation  to  the  clause,  sentence, 
paragraph,  or  part  thereof  directly  involved  in  the  con- 
troversy in  which  such  judgment  shall  have  been  rendered. 

U.  That  unless  otherwise  herein  specially  provided, 
this  Act  shall  take  effect  on  the  day  following  its  passage. 

Approved,  9.10  p.  m.,  October  3,  1913. 


TABLES 

DATES  AND  LIMITATIONS 

Date  of  filing 

Increased  return  by  Collector. 

After  notice  and  proof  justifying  increase. 

Notice  designating  fiscal  year,  by  corporation,  joint  stock  com- 
pany, association,  and  insurance  company. 
Not  less  than  30  days  prior  to  filing  annual  return. 

Return,  by  individual,  representative,  source,  corporation,  joint 
stock  company,  association,  and  insurance  company  (except 
as  below). 
March  1st. 

(No  statutory  provision  for  modification  of  date  of  return, 
assessment,  or  payment  is  made  where  the  representative  or 
source  is  a  corporation.) 

Return,  by  corporation,  joint  stock  compaay,  association,  and  in- 
surance company,  filing  designation. 
Within  60  days  after  close  of  fiscal  year. 

Return,  by  Commissioner. 

Within  3  years  after  taxpayer's  false  or  fraudulent  return. 
(Rev.  Stat.  IJ^  years.) 

Return  on  behalf  of  minor,  incompetent  or  invahd.  Only  pro- 
vision in  this  respect  is  that,  in  case  of  sickness  or  absence, 
Collector  may  extend  statutory  period  not  exceeding  30  days. 

Statement  of  accumulated  profits,  etc.,  by  corporation. 
When  requested  by  Conomissioner  or  Collector. 

Statement  of  profits,  etc.,  by  partnership. 
At  request  of  Conmaissioner  or  Collector. 

Statement  and  claim  for  exemption,  by  owner  of  withheld  income. 
Not  less  than  30  days  prior  to  return  date. 

Date  of  imposition  of 
Interest  (1%  per  month),  or  non-payment,  against  all  taxpayers 
(except  as  below). 

After  June  30th  and  10  days'  notice  and  demand  by  Collector. 
(If  such  notice  and  demand  is  given  later  than  June  20th, 
date  of  imposition  of  interest  is  correspondingly  postponed.) 


TABLES  303 

Interest  (1%  per  month),  for  non-payment,  against  corporation, 
joint  stock  company,  association,  and  insurance  company  (ex- 
cept as  below). 

After  120  days  from  return  date  and  10  days'  notice  and  de- 
mand by  Collector. 

(If  such  notice  and  demand  is  not  given  10  days  prior  to 
payment  date,  date  of  imposition  of  penalty  is  correspond- 
ingly postponed). 

Penalty  (5%),  for  non-payment,  against  all  taxpayers  (except  as 
below). 

After  June  30th  and  10  days'  notice  and  demand  by  Collector. 
Delay  in  notice  and  demand  effects  corresponding  postpone- 
ment of  imposition,  as  in  case  of  interest. 

Penalty  (5%),  for  non-payment,  against  corporations,  joint  stock 
companies,  association,  and  insurance  company  designating 
fiscal  year. 

After  120  days  from  return  date. 

(Delay  in  notice  and  demand  effects  corresponding  postpone- 
ment of  imposition,  as  in  case  of  interest). 

Dale  of  making 

Assessment,  against  all  taxpayers  (except  as  below). 

June  1st. 

See  note  under  "  Return." 
Assessment,  against  corporation,  joint  stock  company,  associa- 
tion, and  insurance  company,  designating  fiscal  year. 

Not  provided — By  analogy,  90  days  after  return  date. 
Assessment,  upon  Commissioner's  return,  against  any  taxpayer. 

Not  provided — Presumably,  immediately  upon  filing  return. 
Collection  of  taxes,  etc. — by  Collector. 

10  days  after  notice  and  demand. 
Distraint  of  personal  property — by  Collector. 

10  days  after  notice  and  demand. 
Payment,  by  all  taxpayers  (except  as  below). 

June  30th. 

(See  note  under  "Return.") 
Payment,  by  corporation,  joint  stock  company,  association,  and  in- 
surance company,  designating  fiscal  year. 

120  days  after  list  or  return  date. 
Payment,  by  any  taxpayer,  on  Commissioner's  return. 

Immediately  upon  notice  of  amount  of  assessment. 
Payment  to  prevent  sale. 

Any  time  before  sale. 


304  TABLES 

Redemption. 

Within  one  year  after  sale. 

Redemption  of  real  property  bought  in  by  United  States,  in  cer- 
tain cases. 
Within  two  years  from  acquisition  by  the  United  States. 

Sale  of  personal  property — by  Collector. 

Not  less  than  10  days,  nor  more  than  20  days  after  notice  of 
distraint.    (Adjournments  not  to  exceed  30  days.) 

Sale  of  real  property. 

Not  less  than  20  days,  nor  more  than  40  days  after  notice 
of  seizure.    (Adjournments  not  to  exceed  30  days.) 

Seizure  of  real  property. 

After  failure  to  find  sufficient  personal  property  to  satisfy 
tax,  etc. 

Date  of  giving 

Notice  of  assessment,  against  individual,  corporation,  joint  stock 

company,  association,  and  insurance  company  (except  as 

below). 

June  1st, 
Notice  of  assessment  against  corporation,  joint  stock  company, 

association  and  insurance  company,  designating  fiscal  year. 

No  provision — by  analogy,  90  days  after  return  date. 
Notice  of  proposed  increase  of  return. 

No  provision. 

Notice  is  to  show  cause. 

Limitation  for 

Appeal  (claim)  to  Commissioner  for  refund  of  taxes,  penalties,  etc. 
Two  years  after  accrual  of  cause  of  action. 

Action  against  United  States  or  Collector  for  recovery  of  taxes, 
penalties,  etc.,  erroneously  assessed  or  collected.  Two 
years  after  accrual  of  cause  of  action,  subject  to  prior  appeal 
to  Commissioner  for  refund. 

(Cause  of  action  is  deemed  to  accrue  at  date  of  adverse  deci- 
sion by  Commissioner.  Action  may  be  commenced  at  ex^ 
piration  of  six  months  after  date  of  appeal,  if  decision  has  not 
then  been  rendered.) 

Appeal  to  Commissioner  from  Collector's  increase  of  return. 
No  provision. 


PENALTIES 


Ground 


Penalty 


Collection  of  foreign  coupons,  etc., 
without  license: 


Disclosure 
garding 
affairs: 


of    information    re- 
taxpayer's   return   or 


Examination — Failure  to  appear 
or  produce  books  for: 


lR,etum — Failure,  refusal,  or  neg- 
lect to  make;  or  to  include 
standard  of  valuation: 


Return — False  or  fraudulent: 


Fine,  not  exceeding  $5000 
and — or 

Imprisonment,  not  exceeding  1  yr. 
(p.  285). 

Fine,  not  exceeding  $1000 
and — or 

Imprisonment,  not  exceeding  1  yr. 

Dismissal  and  permanent  dis- 
qualification, in  case  of  U.  S. 
officer  or  employe  (p.  120). 

Punishment  as  for  a  contempt 
(p.  124). 

Fine,  not  exceeding  $1000 
and — or 

Imprisonment,  not  exceeding  1  yr. 

Costs  of  prosecution  (p.  129). 

Return  by  Collector  (p.  126). 
"        "  Commissioner  (pp.  282, 
296). 

Addition,  50%  of  tax  (note  excep- 
tions) (p.  126). 

Penalty,  $20-$1000  (p.  286). 

Penalty,  not  exceeding  $10,000, 
in  case  of  corporation  (p.  297). 

Return  by  Collector  (p.  126). 
y       "  Commissioner  (pp.  282, 
296). 

Addition,  100%  of  tax,  if  fraud  or 
falsity  intentional  (p.  126). 

Fine,  not  exceeding  $2000 
and — or 

Imprisonment,  not  exceeding  1  yr. 

Costs  of  prosecution  (p.  286). 

Penalty,   not  exceeding   $10,000 

(corporations,  only)  (p.  297). 


305 


306 


PENALTIES 


Ground 

Return  or  statement — False  or 
fraudulent,  to  defeat  or  evade 
valuation,  enumeration  or  as- 
sessment: 

Return — False  or  fraudulent  by 
officer  of  corporation,  etc.: 


Return — ^Understatement  or  un- 
dervaluation in: 
Revenue  officer,  interference  with: 


Statement  or  representation — 
False  or  fraudulent,  to  secure 
exemption  at  source,  etc. : 

Tax — Failure  to  pay  as  required 
by  statute: 


Tax — ^Failure  of  representative, 
source,  etc.,  to  withliold  and 
pay: 


Penalty 

Fine,  not  exceeding  $1000 

and — or 
Imprisonment,  not  exceeding  1  yr. 
Costs  of  prosecution  (p.  129). 
Fine,  not  exceeding  $2000 

and— or 
Imprisonment,  not  exceeding  1  yr. 
Costs  of  prosecution  (p.  286). 
Examination  by  Collector. 
Increase  "        "        (p.  281). 

Penalty,  $500 

or 
Imprisonment  not  exceeding  2  yrs. 

(p.  128). 
Penalty,  $300  (p.  283). 


Addition,  5%  of  unpaid  tax. 

Interest,  1%  per  month  (pp.  282, 
296). 

Collection  by  distraint  (pp.  135, 
140). 

Collection  by  foreclosure  of  lien 
(p.  145). 

Personal  liability  of  representa- 
tive, etc.,  therefor  (p.  283). 


INDEX 

References  are  to  pages 

Note:  The  expressions  "Deduction  of  tax"  and  "Payment  of  tax" 
have,  in  all  cases,  been  used  to  refer  to  deductions  and  payment 
by  "the  source,"  on  behalf  of  another. 

A 
Absentees  .  page 

Return  and  statement  for 67,  75 

Return,  time  of  filing 126 

Accounts  receivable 37,  49 

Accimiulations 

Betterments 98 

Income 38,  39,  49,  78 

Statement  of,  to  Commissioner  or  Collector 50 

Act  of  August  5,  1861 171 

"  "  July  1,  1862 176 

"  "  March  3,  1863 190 

"  "  June  30,  1864 194 

Joint  Resolution,  July  4,  1870 215 

Act  of  March  3, 1865 216 

March  10,  1866 222 

July  13,  1866 224 

March  2, 1867 235 

July  14,  1870 242 

August  27,  1894, 251 

Joint  Resolution,  February  21,  1895 264 

Act  of  August  5, 1909 265 

"  "  October  3, 1913 275 

Act  of  1913 32 

Constitutionality 18 

Construction 31,  32 

Invalidity 118 

Text 32 

Actions  against  U.  S.  or  Collector.    (See  Courts.) 

Appeal  to  Commissioner,  condition  precedent 158-160 

Assumpsit 160 


«  a 

n  ft 

n  <( 

i(  It 

tt  tt 


308  INDEX 

References  are  to  pages 

PAGE 

Burden  of  proof 160 

Claim  for  interest 162 

Costs 160 

Evidence 159 

False  or  fraudulent  return  or  statement 158 

Illegal  tax 158 

Injunction 157 

Judgment,  payment 152,  162 

Limitations,  statutory 158,  162,  164,  165 

Mandamus 163 

Overpayment  of  tax 158 

Parties '. 164-165 

Payments,  volimtary 163,  165 

Protest,  condition  precedent 163 

Punitive  damages 163 

Res  judicata 164 

Set-off 164 

Torts 160,  164 

Trespass  by  Collector 138,  164 

Actions  by  Collector  or  U.  S.  (See  Courts.) 149-150 

Assessment,  condition  precedent 151 

Assessment,  status 150 

Authorization  by  Commissioner,  condition  precedent 151 

Burden  of  proof 150 

Compromise 166-168 

Continuance 168 

Costs 152 

Defences 151 

Discontinuance 167 

Evidence 151 

Judgments,  payment 152 

Laches 151 

Limitations 151 

Set-off 151 

Venue 151 

Acts 

American  Colonial,  State  and  Territorial 4 

British  Colonial 2 

English 1 

Federal 6 

Foreign  (except  English) 2 

Mediaeval , 1 


INDEX  309 

References  are  to  pages 

PAGE 

Additional  tax 44 

Administrators 66,  73 

Affidavits  for  deductions  and  exemption 74 

Agents 66,  73,  113 

Tender  of  payment 134,  138 

Agricultural  organizations 81,  87,  88,  89 

Alaska 

Statutory  definition 115 

Alien.  (See  Citizen,  Non-resident,  Resident.) 

Computation  of  income  of  non-resident 56,  57,  64 

Constitutional  limitations 15,  20 

Definition 42 

Income 34 

Non-resident 20-23 

Return 48 

Resident 20 

Tax 20 

Allowance 

To  children 37 

Amendment,  constitutional 15 

Annual  Income 

Definition 34 

Annuity 34 

Appeal  to  Commissioner 155,  158-160 

From  collector 72 

Application  for  exemption 74 

Application  for  refund 155 

Assessment 33,  130 

Condition  precedent  to  action 151 

"  interest 133 

Corporate 107-112 

Date  of  notification 73 

For  public  improvements 55,  57 

On  Commissioner's  return 73,  130 

On  property  sold  for  taxes , 138 

On  taxpayer's  return 73 

Status  of 131 

Assessor 

Error,  effect 12 

Associations 

Deductions 93-103 

Deduction  of  tax 73 


310  INDEX 

References  are  to  pages 

PAGE 

Foreign 78,  95 

Payment  of  tax 73 

Return 66,  73,  110,  118 

Statement  of  profits 50 

Tax 78,  117 

Attachment 

For  neglect  or  refusal  to  obey  summons 124 

Attorney  General 

Authority,  tax,  etc.,  actions 166-168 

B 

Bad  or  Worthless  Debts 

Deductible 54,  55,  58,  99 

Income 35,  49,  78 

Banks,  Banking  Associations,  &c 89,  95,  110 

Bankers  and  Brokers 

Collection  of  foreign  coupons,  &c 75 

License 76 

Bequests 51 

Betterments.  (See  Cost,  Expenses,  Repairs.) 

Deductible 36,  100 

Non-deductible 37,  54,  101 

Betting  profits 35 

Boards  of  trade 86,  87 

Bonds 69 

Amortization Ill 

Mimicipality.  (See  State.)  . 

Bonded  indebtedness 69,  75,  94,  96,  106 

Books 

Examination  by  Collector 13-14 

Method  of  keeping 55,  123 

Production 116,  123 

Building  and  Loan  Associations 85,  87,  88,  89,  90 

Business^  (See  Doing  Business.) 

Expenses 52,  55,  99 

Losses 59 

Business  Leagues 86,  87 

C 

Capital 38,  103,  104 

Capital  Stock 

Distribution 37,  38,  39 

Return 103,  110,  113 


INDEX  311 

References  are  to  pages 

PAGE 

Cash  Dividends 35 

Cemetery  Companies 86,  87,  88 

Chambers  of  Commerce 86,  87 

Charitable  Corporations 86,  87,  88 

Children.  (See  Minors.) 72 

Allowance  to 37 

Citizen.  (See  Alien,  Non-resident,  Resident.) 39 

Definition,  judicial J 40-41 

Definition,  statutory 40 

Civic  Leagues 86,  87 

Claims  for  Refund.  (See  Refund.) 

CoUection  of  Tax 131-2,  148 

Collector 

Actions  against.  (See  Actions  v.  XJ.  S.  or  Collector.) 

Authority 123 

Authority  on  tax  sale 140-143 

Collection  of  tax 131,  148 

Death  and  Resignation 154 

Delinquent 152 

Demand  for  payment  of  tax  and  penalty 134 

Discretion 127,  140 

Disposition  of  collected  taxes 148 

Distraint 134,  135-137 

Duty  and  responsibility  as  to  collections,  &c 148-149,  153 

Entry  for  inspection,  &c 13-14,  18,  127,  130 

Examination  of  books,  taxpayer's,  &c 13-14,  18 

Extension  of  time  for  return 126 

Inquiries 121 

Preparation  of  return  for  taxpayer 122 

Receipts  for  taxes 115,  131 

Return  for  delinquent  taxpayer 72,  130 

Return  of  property  sold  for  taxes 138 

Summons 123 

Tax  sales 136-145 

Commissioner  of  Internal  Revenue 

Actions  for  tax,  authorization  condition  precedent 151 

Actions,  &c.,  authority  to  compromise 166 

Actions,  authority  to  discontinue 167 

Appeal,  condition  precedent 158-160 

Appeal  from  collector 72 

Assessments 130 

Contempt,  authority 125 


312  INDEX 

References  are  to  pages 

AGE 

Decision,  review 156 

Decision,  status  and  effect 155-156,  161 

Discretion 127 

Fees,  &c.,  on  tax  sale,  authority  to  fix 145 

Forms,  authority  to  prescribe , 121 

Inquiries 130 

License 76 

Penalties,  authority  to  determine 126,  130 

Real  estate,  authority  to  lease  or  reconvey 147 

Refund  and  remission 154,  156-157 

Regulations,  authority  to  make 66,  152,  168 

Remission 127 

Return  for  delinquent  taxpayer 73,  110,  126 

Submission 72 

Tax,  authority  to  determine 130,  138 

"  increase 73,  113,  126 

Company 

Deduction  of  tax 73 

Payment  of  tax 73 

Return 66,  73 

Compromise 166 

Congress 9,  10 

Conservators 

Deduction  of  tax 66 

Payment  of  tax 73 

Return  66,  73 

Constitutional  Amendment 15 

Constitutionality 9-23 

Act  of  1913 18 

Aliens,  taxation  of 15 

Classification  of  taxation  11 

Direct  taxation 9,  14 

Distraint 13 

Double  taxation 12 

Due  process 13 

Entry  by  CoUector 13-14,  18 

Examination  by  Collector 13-14,  18 

Exemption  from  taxation 11 

Ex  post  facto  statutes 15-18 

Impairment  of  contracts '10 

Inequality  of  taxation 12 

Payment  at  source 10 


INDEX  313 

References  are  to  pages 

PAGE 

Penalties 13,  16 

Power  to  tax,  limitation  upon 9 

Prohibition  of  restraining  action 13 

Retroactive  statutes 15-18 

Salaries  of  President  and  Judges 9 

Taxation  of  States  and  subdivisions 9,  10 

Uniformity  of  exemption 11 

Uniformity  of  taxation 11 

Construction  of  Statutes 24-31 

Act  of  1913 31,  32 

Legislative  intent,  external  evidence  of 26 

Legislative  intent,  internal  evidence  of 26 

Particular  acts 30 

Rules,  general 24-26 

Rules  applicable  to  tax  acts 27-30 

Consul 41 

Contempt 124-125 

Contingent  Income 37 

Accounts  receivable 37 

Promissory  notes 37 

Stock  dividends 37 

Copartnership.  (See  Partnership.) 

Corporations.  (See  particular  corporations  under  appropriate  title.) 

Bankrupt Ill 

Consolidated 77,  111 

Deductions 93-103 

Deduction  of  tax 73 

Dissolved Ill 

Dividends 54 

Excise  tax 117 

Exemptions 81,  111,  112 

Fiscal  year. 100 

Foreign ,. . ,  .78,  95,  103-106,  108,  111 

Income 78 

Insolvent 89 

Liquidated Ill 

Net  income 78 

Organized  during  year 112 

Payment  of  tax 73 

Principal  place  of  business 112 

Profits,  undivided 39,  80,  113 

Quasi-public 93 


314  INDBX 

References  are  to  pages  • 

PAO£ 

Return 66,  73,  103-114,  118 

Statement  of  profits 50,  70 

Subsidiary Ill,  114 

Tax 78-92,  117 

Cost 50,  57 

Coupons,  &c 69,  75 

Courts  and  Judges — ^Jurisdiction 

Federal  courts 161 

Federal  judges 125,  168 

Philippine 116 

Removal 161 

State  courts 164 

Supreme  court.  District  of  Columbia 162 

United  States  Court  of  Claims 160 

United  States  District  Court 116,  124,  161 

D 

Damages.  (See  Limitations.) 38,  78 

Date 

Assessment  on  Commissioner's  return 73 

Assessment  on  taxpayer's  return 73 

Payment  on  Commissioner's  return 73 

Payment  on  taxpayer's  retvmi 73 

Return  for  invalid,  &c " 75 

Return  by  taxpayer 47,  103 

Return  by  Commissioner 73 

fable 302 

Tax  year 65 

Debts.  (See  Bad  Debts.) 

Decedent 

Nonpayment  of  tax  by  estate 73 

Return  and  statement  for 49,  71 

Deductions  j 

Bad  debts \ 54,  55,  58 

Basic 72 

Book  entries 99 

Corporation 93-103 

Cost 57 

Definition 51 

Depreciation 54,  55,  58,  61,  93 

Dividends 54,  58,  61 


INDEX  315 

References  are  to  pages 

PAGE 

Expenses 53,  58,  61,  93 

Foreign  corporations 95 

Foreign  coupons,  &c 75, 76 

Individual 52-64 

Indebtedness  seciured  by  collateral,  &c 94 

Insurance 58,  62 

Interest 53,  55,  59,  62,  94 

Loss 53,  59,  63,  93 

Married  persons 56,  65 

Payments  at  source 54,  74 

Profits 59 

Rents 60,  63,  93 

Repairs 63 

Subjects  excluded  by  construction 60-64,  97-98,  101,  103 

Subjects  included  by  construction 57-60,  98-101 

Subjects  excluded  by  statute 53 

Subjects  included  by  statute 53,  93-103 

Taxes 53,  55,  64 

Deed,  tax 141-143 

Definitions 

Alien 42 

Citizen 40-42 

Excise 33 

Income 34 

Net  income 33 

Resident 44-45 

Revenue  law 33 

Tax 32 

Deposits.  (See  Interest) 79 

Depreciation 

Deductible 54,  55,  58,  61,  99,  104 

Estimated 58 

Mines 54 

Not  deductible 102 

Descent 51 

Devise 51 

Distraint 

Constitutionality  of 13 

For  collection  of  tax 134,  135-137 

Repeated 145 

District  Attorney 

Authority  in  tax  actions 168 


316  INDEX 

References  are  to  pages 

PAGE 

District  of  Columbia 

Salaries 53,  117 

Statutory  definition 115 

Dividends 35,  36-38,  58,  61,  79,  80,  92 

Cash 35 

Return 69,  112 

Scrip 36,  49 

Stock 35,  37,  38 

Tax  paid 54,  56 

Undivided 35,  48 

Wages,  payment 58 

Doing  business — By  non-resident 

Corporation 80-82,  lit 

Individual 43 

What  does  not  constitute 82-86 

Double  taxation 12 

Due  process 13 

E 

Earnings.  (See  Income.) 79 

Educational  corporation 86,  87 

Embezzlements 100 

Employer 

Deduction  of  tax 73 

Payment  of  tax 73 

Return 66,  73 

Entry  by  CoUector 127-128,  130 

Equity 

Injunction 13,  157,  164 

Proceedings  for  foreclosure  of  tax  lien 146 

Examination.  (See  Privileged  Communication.) 

Books,  taxpayer,  &c 13-14,  116,  122-124 

Constitutionality  of 13-14 

Neglect  or  refusal  to  obey  summons 116,  124-125 

Excise 

Definition 33 

Excise  taxes 117-118 

Executors  and  Administrators 

Deduction  of  tax 66 

Payment  of  tax 73 

Return 66,  73 


INDEX  317 

References  are  to  pages 

Exemptions  page 

Afl&davit  and  statement  for 74 

Constitutionality 11 

Construction 51 

Corporations,  &c 81-86 

Definition 51 

Foreign  coupon,  &c 75,  76 

Payments  at  source 74 

Quasi-public  corporations 93 

Subjects  excluded  by  construction 53,  89-91 

Subjects  included  by  construction 87-89 

Subjects  excluded  by  statute 93 

Subjects  included  by  statute 51,  93,  95 

Exhaustion.  (See  Depreciation.) 54 

Expenditure.  (See  Costs,  Expenses.) 

Expenses 

Business 52,  58,  61,  93,  99,  104 

Ex  Post  Facto  Statutes 

Civil  proceedings,  application  to 16,  17 

Penalties 15 

Retroactive  statutes 15,  19 

Rules  of  evidence 16 

Extension  of  Time  for  Return 126 

F 

Failure,  Neglect,  or  Refusal 

Return 73,  77,  110,  113,  115,  122,  126,  130 

Tax 73,  113,  126 

False  or  Fraudulent  Return 

Penalty 73,  113,  115,  126,  129 

Refund  and  remission 155 

Return  by  Commissioner 73,  110,  130 

Suit  to  recover  taxes 158 

False  or  Fraudulent  Statement 74,  129,  155 

Family  Expenses 52 

Farmer 61 

Farm  Produce 35,  38,  51 

Rent , 37 

Fees 35,  49 

Fiduciary 

Return 66 

Fine.  (See  Penalty.) 

Fire 54,  101 


318  INDEX 

References  are  to  pages 

Fire  Insurance  Companies  (Mutual)  paob 

Deductions 93 

Exemptions 87,  93,  95 

Foreign 95 

Return 104,  105,  109 

Firms.  (See  Partnerships.) 

Fiscal  Year 100,  102 

Fixed  and  Determinable 66,  69,  73,  75 

Foreign  Corporations 

Business  done  in  U.  S 78 

Coupons  &c 75 

Deductions 98 

Exemptions .' 98 

Return 108 

Foreign  Mortgages 75 

Franchise 

Effect  on  citizenship , 41 

Fraternal  Societies 82,  87,  90 

G 

Gift 36,  51,  62,  100,  102 

Gross  Income 33 

Guardians 58 

Deduction  of  tax 66 

Payment  of  tax 66, 72 

Return 66 

H 

Half  Breed.  (See  Alien,  Citizen.) 40 

Historical.  (See  Acts.) 1-8 

Horse 58 

Horticultural  Organizations 81,  87,  89,  90 

Hospitals.  (See  Charitable  Corporations.) 89,  91 

Husband 

Apportionment  of  income 56 

Deductions 56,  65 

Effect  of  citizenship 40-41 

I 

Import  Duties 64 

Imprisonment.  (See  Penalties.) 76,  77,  120,  129 

Immunity 123-124 


INDEX  319 

References  are  to  pages 

Income.  (See  Deductions,  Exemptions,  Return.)  page 

(For  income  of  particular  corporations,  &c.,  see  titles  of  such 
corporations.) 

Corporations 78 

Definition 33 

Individual 33-38 

Net  income 33,  78,  93,  106 

Subjects  excluded  by  construction 37-39,  57-60,  80 

Subjects  included  by  construction 34r-37,  56,  60-64,  78-80 

Subjects  excluded  by  statutes 51-57 

Subjects  included  by  statutes 34,  48-49,  50,  78 

Income  Tax.  (See  Acts,  Income,  Taj ,) 

Incompetents 

Return  and  statement  for 67,  73,  75 

Return,  time  of  filing 73 

Increase 

Return,  by  Collector 72,  130 

Return,  by  Conunissioner 73,  110,  126 

Tax 112 

Increase  of  Value 

Of  real  and  personal  property 36,  38,  79 

Indians.  (See  Citizen,  Alien.) 42 

Infants.  (See  Children,  Minors.) 

Inheritance 51 

Inheritance,  Foreign 36 

Injunction  Suits 

In  restraint  of  collection 157,  164 

Inquiry  by  Collector 121 

Insane  person 

Non-pajnnent  of  tax  by  estate 73 

Return,  time  of  filing 73 

Return  and  statement  for 67,  75 

Insolvency 

Corporations 89 

Individuals 73 

Non-payment  of  tax  by  estate 73 

Return  and  statement 113 

Inspection.  (See  Collector,  Examination.) 

Insurance 

Deduction 58,  62 

Proceeds  upon  death  of  insured 51-52 

Proceeds  upon  surrender  of  policy. 51-52 


320  INDEX 

References  are  to  pages 

Insurance  companies  page 

Additions  to  reserves 93,  95 

Deduction  of  tax 73 

Deductions 93-102 

Deposits  with  state  officers,  &c I 96 

Exemptions 87 

Fire 87,  93,  95 

Foreign 78,  95 

Life 79,  87,  93,  94,  96,  105 

Marine 94,  96,  104,  105,  109 

Payment  of  tax 73 

Return 66,  73,  104,  109,  111,  114,  118 

Tax ! 78,  117 

Interest.  (See  Bonded  Indebtedness.) 36-37,  104 

Collection  of  foreign,  by  bankers,  &c 69,  75 

Deduction 52,  55,  59,  62,  94-96,  100 

Deposits 59 

Income 36,  38,  79 

Mortgages,  &c 69,  75 

Notes 37,  38,  62 

Pro  rating 36,  59 

Savings  bank 36 

Secured  by  collateral,  &c 94 

Internal  Revenue.    (See  Commissioner,  Taxes.) 

Invalid 

Return  and  statement  for 67,  75 

Return,  time  of  filing 126 

J 

Joint  Guardians,  Executors,  Trustees,  &c 66 

Joint  Stock  Company 

Deductions 93-103 

Deduction  of  tax 73 

Foreign 78,  95 

Payment  of  tax 73,  107,  117 

Return 66,  73,  118 

Statement  of  profits 50 

Tax 78 

Judges.  (See  Courts.) 

Salaries 9,  52,  66 

Judgment 

Payable  by  U.  S 162 

Payable  to  U.  S 152 

Jurisdiction.  (See  Coiuts.) 


INDEX  321 

References  are  to  pages 

L 

Labor.  (See  Cost,  Expense.)  page 

Labor  Organizations 81,  87 

Legacy -.     51 

Legislative  intent.  (See  Construction.) 

Lessees 

Deduction  of  tax 73 

Payment  of  tax 73 

Return 66,  73 

"Levied,  assessed,  collected,  and  paid" 32 

Levy 136 

Libraries.   (See  Charitable  Corporations,  Educational  Corpora- 
tions.) 

License 

Bankers  collecting  foreign  coupons,  &c 76 

Lien  for  tax 134-135 

Suits  to  foreclose,  &c 146 

Life  insurance  companies 79,  87,  93,  94,  96,  105 

Limitations,  statutes  of 

Action  against  U.  S 158,  162,  164,  165 

Action  by  U.  S 151 

Application  for  refund 154,  166 

Redemption  of  property  from  tax  sale 144,  147 

Return  by  Commissioner 73,  110 

Tables: 302 

Live  stock 

Profits  from  sale 36 

Living  Expenses 52 

Loan  Associations.  (See  Building  &  Loan  Associations.) 

Loans 

Bonus 61 

Local  Benefits 

Assessments  for 57,  61 

Lodge  System 83,  87 

Losses 

Business 53,  59,  93,  104 

Capital 103 

Depreciation 54,  58,  61,  93,  95,  99,  102 

Embezzlement 99 

Fire 54,  55,  101 

Robbery 63 

Sales 59,  63 


322  INDEX 

References  are  to  pages 

PAOB 

Shipwreck 54,  101 

Speculation 63 

Storms 54 

Suretyship. . .  .^ , 63 

Wear  and  tear 54,  95 

M 

Mandamus 162-163 

Federal  courts 162 

State  courts 163 

Supreme  Court,  District  of  Columbia 163 

Manufacturing  Concern 79 

Marine  Insurance  Companies  (Mutual) 

Deductions 94 

Exemptions 94,  96 

Return 104,  105,  109 

Marriage 

Effect  on  citizenship 41-42 

Married  Persons 

Deductions 56,  65 

Mines 

Depreciation 54,  93,  95,  99 

Rent 37 

Royalties 37 

Mining  Companies 79,  101,  114 

Ministers 

Gifts 36 

Minors.  (See  Children.) 

Citizenship 40-41 

Return 50,  67 

Return  and  statement  for 75 

Misdemeanor 76,  77,  120 

Mortgagors 

Deduction  of  tax 73 

Payment  of  tax 73 

Return 73 

Municipality.  (See  State.) 

Mutual  Companies 89 

N 

Natural  Gas  Companies 79,  99,  114 

Necessary  Expenses 

Business '. 52 


INDEX  323 

References  are  to  pages 

PAGB 

Family 62 

Net  Income.  (See  Income.) 

New  Buildings .' 37 

Non-resident.  (See  Alien,  Citizen,  Resident.) 

Computation  of  income 64 

Deductions 56,  57 

Taxation,  alien 20-23 

Income,  definition 33 

Return 48 

Normal  Tax.  (See  Tax.) 66,  74,  77 

Notes.  (See  Promissory  Notes.) 

Notice 

Assessment  of  tax 73,  130,  132 

Demand  for  payment  of  tax 132,  134 

Return,  proposed  increase 72 

Return,  to  make 122 

Tax  sale 137,  141 

O 

Oil  Company 80,  99 

Operating  Expenses 93 

Ores 

Depletion 93 

P 

Partnership  , 

Deduction  of  tax 66,  73 

Non-taxable 67 

Payment  of  tax 73 

Profits 67 

Return 66,  67,  70,  72,  73 

Statement 67 

Taxable 91 

Patents  and  Patent  Rights 57,  58 

Pay,  Extra 35 

Payment  at  Source 10,  66,  73,  75 

Payment  of  Tax 

Dates '. ; 73 

On  Commissioner's  assessment 73 

Penalty  for  delay 73 

Penalty 

Constitutionality 13 


324  INDEX 

References  are  to  pages 

PAGE 

Deductions 60 

Delay  in  payment  of  tax 73,  113,  126 

Determination  by  Commissioner 126,  130 

Divulging  information 120 

Ex  post  facto 15 

False  or  fraudulent  return 73,   110,   113,   115,   126,  129 

False  or  fraudulent  statement 74,  77,  129 

Foreign  coupons,  &c.,  collection 76 

Neglect  to  declare  monetary  standard  in  return 128 

Neglect  or  refusal  to  make  return 73,  77,  110,  115,  126 

Non-payment  of  tax 132,  133 

Not  collectible  when 150 

Obstruction,  &c.,  of  Collector 128 

Remission  by  Collector  or  Commissioner 127,  154 

Remission  by  Secretary  of  Treasury 157 

Single,  only 127 

Source,  liability 74 

Table 302 

Pensions 36,  49,  63 

Personal  Expenses 58,  61 

Personal  Injuries 

Damages 38 

Personal  Liability 76 

Petroleum  Company 80,  99,  101,  114 

Philippine  Islands 

Administration  of  Income  Tax,  Act 116 

Native 40 

Salaries 53,  117 

Statutory  definition 115 

Political  Sovereignties.  (See  State,  &c.) 

Porto  Rico 

Administration  of  Income  Tax  Act 116 

Native  or  resident  Spaniard 40 

Salaries 53,  117 

Statutory  definition 115 

Premiums 

Bonds 63 

Insurance .' 80,  93,  94,  95,  96,  104 

Lease 63 

Loan 61 

President  of  the  United  States 

Salary ." 9,  52,  65 


INDEX  '  325 

References  are  to  pages 

PAGE 

Principal  Place  of  Business 112 

Privileged  Communication 121,  123,  124 

Production  of  Books 123-124 

Profits.  (See  Income.) 

Accumulation  or  use  for  betterments 39,  80,  99,  101 

Betting 35 

Deduction 59 

Expenses  of  distribution 58 

Live  stock,  sales 36 

Partnership 36 

Personal  property,  sales 36-37 

Prospective 39 

Real  property,  sales 36 

Rules  for  computation 36-37,  79 

Stock,  exchange 36,  39 

Stock,  sales 36-37 

Timber,  sales 37 

Undivided 39,  80,  113 

Promissory  Notes 37-38 

Contingent  income 37 

Property 

Delinquent  Collector 152 

Distraint 134,  135-137 

Exempt  by  State  Statute 53 

Profits  from  sales 36-37,  59,  63 

Redemption 147 

Repeated  distraints  and  seizures 145 

Seizure  and  sale 140-145 

Unsold,  increase  in  value 36,  38 

Property  Rights 

Affecting  citizenship 41 

Protest 163 

Public  Officers 

Federal 73 

State 9,  52,  65 

PubHc  record 114 

PubHc  Utility 88,  91 

Punitive  Damages 163 

Purchase  Price 63 

Instalments 37,  38 


326  INDEX 

References  are  to  pages 

Rate  of  Tax.  (See  Tax.)  page 

Real  Estate 

Authority  of  commissioner 147 

Companies 82 

Deed,  upon  tax  sale 141-143 

Depreciation 60 

Mortgaged 113 

Profits  from  sales 36 

Purchase  price,  instalments 37,  38 

Redemption  from  tax  sale 144-145,  147 

Repeated  seizure  and  sale 145 

Seizure  and  sale  for  taxes 140-145 

Receipt 

Tax 115 

Receivers 

Deduction  of  tax 66 

Payment  of  tax 73 

Return '. 66,  73,  113 

Sales 80 

Redemption  from  Tax  Sale 144-145,  147 

Refund,  &c. 

AppUcation 154 

By  Commissioner 154 

By  Secretary  of  Treasury 154,  157 

Limitation,  statutory 166 

Refusal.  (See  Failure,  Neglect  and  Refusal.) 

Re-insurance 94,  96 

Religious  corporations 86,  88 

Rent.  (See  Income.) 37-39,  49,  60,  63,  93,  101,  104 

Betterments  by  tenants 37 

Mine  royalties 37 

Pajnnent  in  produce 37 

Rental  value 39,  63 

Repairs.  (See  Betterments,  Cost,  Expenses.) 60,  63 

Representatives 

Deduction  of  Tax 66 

Liability 74 

Payment  of  tax  return 66,  75 

Reserve  fund 93,  94,  95,  104,  104,  113 

Residence 44—15 

Resident.  (See  Alien,  Citizen,  Non-resident.) 43-45 


iMdex  327 

References  are  to  pages 

Retroactive                 .  page 

Ex  post  facto  penalties 15-18 

Return 47-50,  65,  103 

Absentee 67,  75 

Agents 66 

Amendments,  &c.  by  commissioner 73,  110,  126 

Associations 66,  73,  118 

Banks,  &c 110 

Collector 72 

Commissioner 73,  110,  130 

Companies 66,  73 

Confidential  information 120 

Conservators 66 

Contents 47,  71,  103 

Corporation 66,  73,  103-114,  118 

Date 47,  68,  73,  103 

Debt  to  be  collected 49 

Decedent 71 

Definition 47 

Deputy  collector 112 

District 47,  65,  71,  103 

Dividends 48-49,  112 

Divulging  information 120 

Employers 66,  73 

Exceptions — Exempt  corporations 03 

Executors  and  administrators 66,  73 

Extension  of  time 126 

Failure,  neglect  or  refusal 73,  77,  110,  113,  115,  122 

False  or  fraudulent 73,  110,  113,  115,  122,  155,  158 

Fiduciaries ' 66 

Form 47 

Guardians 66,  71 

Increase  by  Collector,  Commissioner 72,  73 

Individual 47-50,  65 

Insane 67,  75 

Insurance  companies 66,  73,  104,  118 

Invalid 67,  75 

Items  returnable 49-50,  69-71,  112-114 

Items  not  returnable 48,  50 

Joint  stock  companies 66,  73,  118 

Lessees 73 

Minor 50,  67,  72,  75 

Monetary  standard,  statement 128 


328  INDEX 

References  are  to  pages 

PAGE 

Mortgagors 73 

Normal  tax 66 

Notice  and  demand  by  Collector 122 

Partnership 67,  70,  72,  73 

Period 113 

Place 47,  65,  68,  103 

Preparation  by  Collector 122 

Privileged  communication 121 

Profits 113 

Public  record 114 

Real  estate,  mortgaged 113 

Receivers  and  conservators 66,  73,  113 

Representatives 66-73 

Rules 50,  72 

Source 66 

Statutory  provisions,  table 47-48,  68-70,  107-110 

Subjects  excluded 48,  50 

Subjects  included 49-50,  69-71,  110-114 

Subsidiary  companies 114 

Supplemental  statement 114 

Trustees 66,  73 

Understatement 72,  130 

Undervaluation 72,  130 

United  States  officers 73 

Verification 48,  68,  72,  103,  107 

Wife 50 

Revised  Statutes 120-168 

Amendment 115,  1 17 

Rules  and  Regulations 66,  76,  152,  158,  168 

S 

Salaries 60 

Judges,  federal 9 

President  of  the  United  States 9 

State  officers  and  employes 9 

Sale  for  Taxes 

Certificate 139,  141-142 

Character 139 

Collector,  authority 136,  138,  141-142 

Deed 141-143 

Disposition  of  proceeds 138,  140 

Expenses  and  fees 136,  139,  145 


INDEX  329 

References  are  to  pages 

PAGE 

Notice 137,  141 

Personal  property 137-140 

Prevention  by  payment 139,  144 

Purchase  by  U.  S 138,  141 

Real  property 140-145 

Savings  Banks  (Mutual) 82,  88,  89 

School 91 

Scientific  Corporations 86,  88 

Search  Warrant 168 

Secretary  of  the  Treasury 

Compromise  of  actions 157,  166-168 

Forms,  regulations,  &c 66,  76,  158 

Real  estate,  reconveyance 147 

Refund 154,  157 

Remission 157 

Taxes,  &c.,  disposition , 149 

Securities 94,  96 

Seizure  and  Sale.  (See  Property,  Sale  for  Taxes.) 

Shipwreck 54,  101 

Source 

Deductions,  interest  on  bonds,  &c 56 

Deduction  of  tax 56,  66,  73 

Liability 74 

Payment  at 10 

Payment  of  tax 56,  73 

Return 66-73 

State,  &c.  (See  Courts.) 

Business  operations v. 93 

Obligations 10,  52,  64,  91,  92 

Officers  and  employes,  salaries 9,  52,  64 

Statutory  definition 115 

Statutory  exemption 52,  53,  88,  90,  91,  92-93 

Taxation,  constitutionality 9 

Statement  of  Profits 50,  67 

Statement  for  Exemption 

False  or  fraudulent 74,  129,  155,  158 

Supplemental 114 

Statutes 

Effect 118 

•  In  force 116 

Repeal 117,  118 


330  INDEX 

References  are  to  pages 

PAGE 

Steamship  Companies 82,  84,  100,  113 

Stock 

Appreciation  in  value 36 

Depreciation  in  value 58 

Dividends 35-38 

Profits  from  exchange 36,  39 

Profits  from  sales 36-37 

Storms 54 

Submission  to  Commissioner 72 

Suits.  (See  Actions.) 

Summons 116,  123,  124 

Supplemental  Statement 114 

Sur-Tax.  (See  Tax.) 46,  47,  48 

T 

Tax 63 

Actions  against  United  States 158-165 

Actions  by  United  States 149-151 

Agent,  payment,  tender 134,  138 

Apportionment 56 

Assessment 100,  131 

Assessor's  error,  efifect 12 

Classification,  constitutionality 11 

Collection 131,  148 

Commissioner 73 

Corporate 76,  99,  106,  117 

Deduction 52,  55,  64,  95,  96 

Deed 141-143 

Definitions 32 

Deposit 149 

Direct,  constitutionality ;8,  14 

Distraint  for  collection 134,  135-137 

Distraint,  constitutionality 13 

Dividends 54 

Double,  constitutionality 12 

Excise  tax 117 

Ex  post  facto 15 

Increase 73,  113,  126 

Individual .34,  39,  46 

Inequality,  constitutionaUty 11 

Liability  of  taxpayer , 76 

Lien 134-135 


INDEX  331 

References  are  to  pages 

PAGB 

Limitations 168 

Non-payment 132,  133 

Non-resident 15,  20-23 

Normal  tax 34,  39,  46,  66,  74,  77 

Notice  and  demand 132 

Payment  by  agent 134,  137,  138 

Payment  by  source 10,  73 

Payment  on  Commissioner's  return 73 

Payment  on  taxpayer's  return 108,  132 

Payment  to  prevent  sale 139 

Penalties 132,  133 

Period,  tax 34,  65,  98 

Reasonableness,  constitutionality 10 

Refund  and  remission 154,  157,  166 

Representative 73 

Residence 44-45 

Retroactive,  constitutionality 15 

,  Source 54,  56,  66,  71 

Sur-tax 46,  47,  48 

Table 46 

I  Uniformity 11 

Tax-Free  Payments 94,  96 

Taxpayer 

Liability • . .     76 

j  Tender  of  Payment 134,  138 

i  Territories 53,  115 

I  Timber 37 

)  Torts 164 

'.  Trespass 138,  164 

Trust  Companies 82,  95 

Trustees 89,  121 

Deduction  of  tax 66 

Distribution  of  profits,  expense 58 

Payment  of  tax 66 

Return 66 

Right  to  inspect  return  of  corporation 121 

Tender  of  Payment 134,  183 

U 

.  United  States.  (See  Actions,  Courts.) 

Limitations,  statute  of 151 

\  Obligations 64 

i 


332  INDEX 

References  are  to  pages 

PAGE 

Officers  in  control  of  funds 66,  73 

Statutory  definition 115 

V 

Verification 103 

W 

Wages 60,  64 

ChUdren 49,  50 

Deductions  by  source 73 

Unproductive 64 

Wear  and  Tear 54 

Wife 

Apportionment  of  income 56 

Citizenship 41 

Deductions 56,  60,  65 

Return 50 

Withholding  Tax.  (See  Source  Tax). 

Witnesses 123 


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